For environmentalists, global politics can feel like a lonely place. Recent headlines include Bolsonaros “huge rise in Amazon destruction”, the re-election of Australias “coal-clutching premier” and Trumps disdain for climate action; “we have the cleanest air weve ever had”.
But last week, environmentalists found an unlikely ally: the UK financial sector, which published its first Green Finance Strategy on 2 July.
To help implement the strategy, the UK launched a Green Finance Institute, the City of London hosted a Green Finance Summit and UK financial regulators launched a joint statement on climate change. This is the first real example of the UKs financial regulators seriously addressing climate change. And all this follows the UKs world-leading commitment to net-zero carbon emissions by 2050.
If thats not enough, the London Stock Exchange recategorised oil and gas firms as “non-renewables”. Action to tackle climate change has become an unlikely legacy of the May government.
The UKs Green Finance Strategy can be understood in two ways: greening finance and financing green. The distinction sounds like a semantic move, but the two categories are different.
Greening finance will ensure the current and future financial risks and opportunities from climate change become part of financial decision-making. Financing green is the acceleration of finance to support the delivery of the UKs carbon targets and clean growth.
A core part of “greening finance” is an expectation for companies and investors to report against the Task Force on Climate-related Financial Disclosures (TCFD) framework by 2022 at the latest. At the organisation I work for, the UN Principles for Responsible Investment (PRI), were finding that momentum on TCFD is growing. Over 500 investors representing $42trn in assets, including over 80 in the UK, are reporting to us on TCFD-based climate risk indicators. Yet implementation remains partial, especially on the important-but-tricky-to-do recommendations from the TCFD on forward looking analysis. Through improved corporate reporting, education and guidance, the UK government can reduce information barriers.
On “financing green”, the UK government needs to go further still. A major gap is financing green infrastructure. The UK could also follow the French in issuing a sovereign green bond. Paris and Frankfurt present real competition in winning green capital.
But most importantly, the test of the new Conservative government will be whether policy change is introduced to meet the strategys objectives.
In 2006, former UN secretary-general, Kofi Annan launched the PRI at the New York Stock Exchange. Thirteen years on, it still stands ready to help, with most major investors having signed the PRI, requiring them to report annually on their responsible investment activities.
We have access to the latest climate finance thinking across the investment community, and were headquartered on the Citys doorstep. Last week, our
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