Energy & Climate
‘Banking is not neutral’
Banks urged to ‘Think Bolder’ to drive positive shift in global finance sector.
8 November 2023
This article first appeared in our COP30 special issue of My Green Pod Magazine. Click here to subscribe to our digital edition and get each issue delivered straight to your inbox
Main image: Heather Buchanan, CEO and co-founder of Bankers for Net Zero, at the Carbon Markets Reception
The UK is on a path to net zero, but many fear the 2050 deadline is simply too far off and that, after 30 years of target-setting, we should already be well on the road to environmental recovery.
‘Three main things are blocking the transition’, says Heather Buchanan, CEO and co-founder of Bankers for Net Zero (B4NZ): ‘policy uncertainty, fragmentation and misaligned incentives that reward short-term profit over long-term resilience. Finance, policy and real economy actors are working in silos when systemic challenges demand systemic solutions.’
The banking sector, which controls trillions in assets and is the bridge between capital and the real economy, has a key role to play in the transition to net zero; yet Heather rightly insists that no single actor or sector can achieve the transition alone.
Banks can’t move without policy clarity; policymakers can’t legislate effectively without industry input and businesses can’t decarbonise without access to finance.
‘Collaboration is the only way to align incentives and unlock systemic change’, Heather asserts. ‘Policy, finance and community development have historically been siloed; the result has been fragmented initiatives that don’t scale. B4NZ’s unique role is convening these worlds and demonstrating that when you integrate them, you can unlock capital flows that benefit both people and the planet.’
Heather has always been deeply motivated by the ways in which finance can be used to serve society.
Before founding B4NZ, she spent over a decade working at the interface of financial services and policymaking. ‘My focus was on designing systems that could serve the economy better, whether through banking regulation, parliamentary engagement or policy reform’, she tells us. ‘Those experiences gave me a front-row view of how financial policy can either accelerate or obstruct systemic change.’
The more Heather worked with parliamentarians, banks and regulators, the clearer it became that the financial system has both the power and the responsibility to deliver solutions at scale.
‘I wouldn’t say I grew up as a ‘climate activist’’, she admits, ‘but over time, it became clear to me that climate change is the greatest systemic risk to both our economy and our way of life. Once you see that, the conclusion is unavoidable: unless finance is harnessed to drive the transition, we won’t have a resilient or prosperous future.’
B4NZ’s purpose is to accelerate the transition to net zero. It was set up ahead of conversations in 2019 about how to bridge the gap between high-level commitments and action on the ground.
‘The spark for B4NZ came ahead of COP26’, Heather remembers. ‘We could see trillions in capital had been committed to ‘net zero’ through international initiatives, but there was no clear mechanism for translating those commitments into practical delivery within the UK’s unique policy and market context.’
Heather wanted to create a platform that was collaborative, pragmatic and ‘laser-focused on turning commitments into action’.
From the outset, B4NZ’s mission has been to align banks, policymakers and businesses so that finance can flow into the real economy, supporting SMEs, scaling retrofit, transforming agriculture and driving nature-positive investment.
‘It’s not a lack of capital that’s stopping finance from flowing to the real economy, it’s a lack of investable projects, combined with risk perception’, Heather explains. ‘Too often, the conversation is framed as cost rather than opportunity. That narrative has to change. Banks need data they can trust, policy frameworks they can rely on and scalable models they can replicate.’
The appetite is there; recent B4NZ membership surveys reveal that banks and corporates are working with B4NZ in order to collaborate pre-competitively, shape policy and demonstrate leadership.
‘For many, it’s also about commercial opportunity’, Heather tells us’; ‘there are hundreds of billions of pounds to be made in the transition, from retrofitting the UK’s building stock to financing clean energy SMEs in emerging markets. So while there is genuine climate concern, there’s also a hard-nosed business case. Banks that fail to adapt will lose competitiveness. Those that lead will unlock entirely new markets.’
B4NZ’s work with UK banks, ranging from high-street names like NatWest to challengers like Allica and Tide, has revealed a demonstrable will to act.
The question is whether the right policy frameworks are in place; ‘That’s where B4NZ adds value’, Heather shares. ‘We’re trying to design solutions that make green finance frictionless and scalable.’
For Heather, the role of banks isn’t just to fund ‘green’ projects’, but to enable entire sectors to transition.
Domestically, B4NZ’s focus is on SMEs; they represent 99% of UK businesses and over half of employment, yet have historically been overlooked in climate policy and remain underserved when it comes to support reaching net zero.
‘The role of SMEs is critical’, Heather shares, ‘not just because of their carbon footprint, but because they are innovators, supply chain linchpins and community anchors. But for SMEs net zero isn’t just about compliance; it’s about opportunity. SMEs that decarbonise can reduce costs through efficiency, access new markets and attract investment. They also build resilience against shocks, whether that’s energy price spikes or supply chain disruptions.’
Through B4NZ’s SME Sustainability Data Taskforce and in its role as an associate member of the Transition Finance Council, it’s reducing reporting friction, improving access to green finance and building the architecture that will allow SMEs to decarbonise at scale.
‘We’re also working on retrofit finance and agriculture transition’, Heather shares, ‘both of which are critical to the UK’s climate goals but stuck in delivery gaps.’
The impact of this work will be huge: it will generate cost savings for businesses, new markets for banks and accelerated emissions reductions across the real economy.
While decarbonising domestic SMEs is seen as critical to the UK’s emissions reduction targets, Heather believes that the transition will be won or lost in emerging economies.
‘That’s where future emissions growth lies’, Heather puts its simply. ‘The choices being made now in countries like Tanzania, Bolivia or Ukraine – whether they build coal plants or leapfrog to clean infrastructure – will lock in carbon trajectories for decades.’
Emerging economies also hold much of the world’s biodiversity and natural capital. Without finance flowing into these regions, the climate and nature crises suddenly look unavoidable, yet a critical funding gap limits their ability to mitigate climate risks and achieve sustainable development.
‘Despite global commitments, mobilisation of capital remains slow, held back by insufficient collaboration, ineffective financing structures and lack of supportive policies’, Heather tells us. ‘Perceived risk, lack of local capacity and the mismatch between global capital requirements and local realities are additional barriers; many projects are simply too small, fragmented or complex for large institutional investors.’
As you’d expect, B4NZ is addressing these systemic barriers through an integrated model that combines climate diplomacy, policy advocacy, private capital mobilisation and deep local partnerships.
The approach, anchored in UK parliamentary engagement and B4NZ’s role as a UN Race to Zero Accelerator, leverages the UK’s financial services ecosystem and diplomatic reach to deliver scalable, high-integrity finance across priority regions.
B4NZ has already developed plans to move from dialogue to delivery through a set of initiatives that demonstrate scalable financial mechanisms.
In the UAE, a blueprint is being created to accelerate net-zero investment by integrating private, public and philanthropic capital with supportive policies.
Domestic energy capacity is being expanded in Tanzania through strengthened local financial and technical capabilities, which enable the structuring of bankable projects linked to the UAE/UK fund.
In Ukraine, preparatory work is underway to mobilise institutional capital via an Article 6.2-aligned framework, bringing political, financial and institutional engagement into one coherent approach.
This could support the reconstruction of a renewable, decentralised and resilient energy system, building an aggregated project pipeline of up to £500 million.
Similarly, Article 6.2 programme work is being developed in Bolivia to support rainforest preservation.
B4NZ’s international projects demonstrate how political agreements and policy frameworks can be embedded into practical, investable financing structures.
Heather’s hope is that, as world leaders convene for the next round of climate negations at COP30, the talks will lead to a breakthrough on climate finance.
‘We need commitments that go beyond pledges to actual mechanisms for mobilising trillions, not billions’, she tells us. ‘My hope is that COP30 puts emerging markets at the centre of the agenda, with clear roadmaps for private investment alongside public funds.’
Irrespective of the outcome, B4NZ will continue to test and scale innovative decarbonisation solutions that others can adopt globally.
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