The Department for Business Energy and the Industrial Strategy (BEIS) has presented its Green Finance Strategy. This document aims to align the private sector with the UK's ambitious climate targets while contributing to the country’s financial sector services. This will be done through three axes: greening finance by mainstreaming climate and environmental factors, financing green growth and capturing the opportunity for cementing UK’s leadership on green finance.
The UK has a legal framework providing one of the most ambitious targets for decarbonisation, currently commiting to net zero by 2050, set out iny the UK’s Climate Change Act and the 25 Year Environment Plan. The British economy has grown 72% since 1990, while its greenhouse gas emissions have reduced by 42% (compared with +65% and -5% respectively in G7 countries). According to the Bank of England, 70% of banks in the UK now consider climate change as a financial risk and green financial products are increasingly becoming more widespread in the market. On the contrary, the same source noted that just 10% of banks in the UK are taking a long-term strategic approach to manage the financial risks from climate change.
The newly-launched Green Finance Institute will work in partnership with Government, financial services and key stakeholder groups to facilitate those objectives by working on four specific areas:
- Catalysing finance to accelerate the economic transition through convening both sectors focused and place-based mission-led coalitions to unlock the barriers to the deployment of capital;
- Supporting the greening of the financial system through close collaboration with financial regulators and policy-makers;
- Building UK capacity on green finance, including providing an accessible, digital platform to collate resources and share and showcase developments across all aspects of UK green finance; and
- Driving the global green finance agenda through international dialogue, partnerships and trade.
The Strategy identifies two types of climate-related financial risks, the physical ones from the impacts of climate change in our habitat and the transition risks, derived from the necessary policy, legal, technology, and market changes to address mitigation of and adaptation to climate change.
Since 2010, there has been more than £92 billion invested in clean energy in the UK8. We have also made specific interventions to accelerate green financing, for example, through the Green Investment Bank (GIB). Working alongside over 100 private sector and third-party investment partners, GIB committed £3.4 billion of its own capital to 100 projects with a total value of over £12 billion9. And the transition to a clean and resilient economy will hugely expand the opportunity for green finance investments – from homes to power generation to our natural environment.
As a global financial hub and international investor, the UK role in facilitating energy transition goes beyond its borders. As such, the country has stimulated climate investments and green finance partnerships around the World. For UKEF role on energy transition, you can read our article on the House of Commons’ Environmental Audit Committee review on its 19th report.
This represents a unique opportunity for the deployment of Renewable Energy in the UK and abroad. AD not only provides clean energy around the clock but contribuutes significantly to a number of wider environmental objectives, such as soil health. You can find here more information about proposed indicators in the 25 Year Environmental Plan.