London’s bankers – pioneers of green finance?

"Regard to climate change will soon even become mandatory," announced Ben Caldecott, member of the UK Green Finance Taskforce and director of the Sustainable Finance course at Oxford University. EPA-EFE/ANDY RAIN [EPA-EFE/ANDY RAIN]

Last week, the UK became the first major industrialised country to pass a law to reduce its carbon emissions to zero by 2050. Now London is publishing a strategy to redirect global financial investments into climate-friendly projects. The idea of bankers investing in the environment should sound less paradoxical in the future. EURACTIV Germany reports.

The OECD estimates that the transition to a climate-neutral economy based around new technologies, sustainable services and carbon-neutral infrastructure will cost around $6.9 trillion by 2030.

Currently, not even half of this sum is being invested in green projects.

London, however, has found a niche in the market and seems eager to make this mainstream. The City seems convinced that green finance could attract a lot of new investments.

This sentiment was echoed by Finance Minister Philip Hammond and Business and Energy Minister Greg Clark in their foreword to the Green Finance Strategy presented at the Green Climate Summit in London on Tuesday (2 July).

The strategy has two main objectives.

On the one hand, it seeks to ensure that private financial flows are linked to sustainable and resilient growth.

It is also about the competitiveness of the British financial sector, which is currently a pioneer when it comes to green financing.

The report identifies three strategies for achieving this goal.

Firstly, the financial risks caused by climate and environmental factors need to become the core of economic decisions and the markets for sustainable products need to be strengthened.

Secondly, the Green Finance Strategy aims to accelerate financial flows to meet British climate targets.

And thirdly, British financial services should capture opportunities that are available at the national and international levels. Notably, the strategy mentions climate-related data analysis and special financial products.

“Finally, people with money are beginning to notice what it all means to them,” said Margaret-Ann Splawn, who is the managing director of the Climate Markets & Investment Association.

For over twenty years Splawn has been working in the field of financial market activities and seemed surprised at how diverse the audience at the Green Climate Summit was. There were representatives from the insurance, industry and financial sectors.

Splawn told EURACTIV that this was a positive step towards sustainable finance, seeing that more than just lip-service was being given to the issue.

Mandatory climate reporting

Regard to climate change will soon even become mandatory for companies, indicated Ben Caldecott, member of the UK Green Finance Taskforce and director of the Sustainable Finance course at Oxford University.

“The Strategy is ambitious in scope, and rightly so. It clearly indicates that the UK will require the use of the Task Force on Climate-related Financial Disclosures (TCFD) recommendations by 2022, a key requirement for listed companies to systematically measure and manage climate-related risks,” he said.

In short, companies will then have to disclose climate risks in their annual reports. This should lead to more transparency and less greenwashing.

These steps can be seen as part of the preparation for the UK’s COP26 presidency by 2020, by which time the Paris climate agreement is set to be implemented.

What is needed now are “clear, loud and lasting” policies, Splawn said.

As an example, she cited investments to improve energy efficiency, a sector which could do with more funding.

This is something the financial industry could deliver on. Yet, for anything to happen, politicians need to get involved.

“This is what we’re trying to do in London right now. There needs to be a common approach to innovation and politics if we want this to have the necessary reach,” Splawn added.

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