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Green finance in the UK

Chancellor’s plan to position the UK ‘at the forefront of green finance’
Green finance in the UK

Recognising that financial services are a critical enabler in the drive for net zero, yesterday (09 Nov) the Chancellor outlined new proposals to support sustainable financial flows and extend the UK’s leadership in green finance ahead of hosting COP26.

To help the UK meet its 2050 net zero target and other environmental objectives, the government will issue its first Sovereign Green Bond in 2021 subject to market conditions – and intends to follow up with a series of further issuances to meet growing investor demand for these instruments.

These bonds will help finance projects that will tackle climate change, finance much-needed infrastructure investment and create green jobs across the country.

Climate-related disclosures

The Chancellor also announced the introduction of more robust environmental disclosure standards so that investors and businesses can better understand the material financial impacts of their exposure to climate change, price climate-related risks more accurately and support the greening of the UK economy.

The UK will become the first country in the world to make Task Force on Climate-related Financial Disclosures (TCFD) aligned disclosures fully mandatory across the economy by 2025, going beyond the ‘comply or explain’ approach.

‘This is a good first step, but if we’re going to tackle the climate and nature emergency, we need to go beyond just disclosing the damaging things that companies are doing.

‘We can stop them from happening in the first place with mandatory plans that set out how our companies are putting themselves on a path to net zero along with the country – and then ensuring that the huge amounts of money that flow from our financial sector aren’t funding the activities that are destroying our world.’


Mandatory disclosures

The joint Government Regulator TCFD Taskforce published its interim report on 09 Nov, with a roadmap for implementing mandatory disclosures, many of which will come into force by 2023.

The upcoming rules and regulations will capture a significant portion of the economy including listed commercial companies, UK-registered large private companies, banks, building societies, insurance companies, UK-authorised asset managers, life insurers, FCA-regulated pension schemes and occupational pension schemes.

‘Tackling climate change means the corporate sector is not just green round the edges but green right to its core. The Chancellor’s plans to make disclosure mandatory for companies is right if the rules are compulsory and thorough.

‘The real win would be to make all financial institutions put in place plans to meet the Paris Climate Agreement by the end of next year, steadily choking off the supply of cash to planet wrecking activities. Disclosure is a route to making that happen, but not an end in itself.’

Greenpeace UK’s policy director

Defining sustainable activities

The UK will also implement a green taxonomy – a common framework for determining which activities can be defined as environmentally sustainable – which will improve understanding of the impact of firms’ activities and investments on the environment and support our transition to a sustainable economy.

The UK taxonomy will take the scientific metrics in the EU taxonomy as its basis and a UK Green Technical Advisory Group will be established to review these metrics to ensure they are right for the UK market.

And to support and benefit from the development of common international standards on taxonomies, the UK also intends to join the International Platform on Sustainable Finance.

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