As Britain prepares to leave the European Union, the UK should focus on becoming a global hub for innovation in green finance, says a discussion paper from the City of London’s Green Finance Initiative, published in association with the climate change think tank E3G.

Some recommendations contained in ‘Fifteen Steps to Green Finance: A discussion paper from the UK Green Finance Initiative’ includes setting up a green finance fintech catapult, creating a Green Standards Board to build trust in new green finance products, and directing grants or tax exemptions to firms issuing and listing verified green bonds.

The report’s authors, Ingrid Holmes and Dileimy Orozco, say: “The primary focus should be on targeting green finance reforms to accelerate investment by the UK as well as global financial institutions into the UK economy – followed by exporting that expertise and capital globally.” The paper’s recommendations include a mix of policy reforms, improvements to domestic infrastructure and boosting global trade.

The proposals set out in the report are intended to ensure financial firms take proper account of climate-related financial risks. Green finance has seen major financial hubs around the world vying to become leaders in the sector, which is estimated to be worth up to $90 trillion globally.

The Green Finance Initiative, setup by the City of London Corporation in January 2016, represented by banks, insurers, accountants, academics, regulators, and government, has outlined 15 proposals to support the UK’s financing of sustainable and low-carbon investments.

Specifically, the report recommends:

  1. Creating a Green Fintech Catapult: a world-leading centre designed to transform innovation on green finance from largely academic ideas to commercial products and services;
  2. Reporting by financial institutions on their alignment with the goals of the Paris Agreement;
  3. Creating a new UK Green Standards Board: to build trust in new green finance products and funds through credible quality controls and audits;
  4. Direct grants or tax exemptions to firms issuing and listing verified green bonds in the UK. There should be a consultation on potential incentives for holders and issuers of green securities and loans;
  5. Creating a joint initiative between the Association of British Insurers (ABI), DEFRA, BEIS and Communities and Local Government (CLG) to develop and promote a UK climate resilience bond market, with a view to then promoting the resilience bonds to overseas markets.

Policy Chairman at the City of London Corporation Catherine McGuinness said:

“The world is getting warmer, sea levels are rising and extreme weather conditions are increasingly unpredictable, causing devastating effects.

“The onus is on us to put right our negative impacts on the environment, and this paper clearly outlines how financial firms can really make a difference.

“As Brexit looms and the UK looks to establish a name for itself outside the European Union, we have an opportunity to show our truly global reach and become a leading figure in renewable investment, which is set to grow exponentially in the coming years.”

Ingrid Holmes, Director at E3G added:

The sheer number of green finance announcements coming from financial institutions in the past months is remarkable. It's time for the UK government to harness this momentum with UK- focused policy reforms that accelerate momentum in this growing sector.”

The paper recognises that Brexit creates complications for the growth of green finance in the UK because of the reduction in funds from the European Investment Bank. It does however highlight that the 15-steps provide the UK with its own unique way of funding the latest renewable projects and seizing the opportunities that green finance presents.

Notes to editors

  1. The full report, ‘Fifteen Steps to Green Finance: A discussion paper from the UK Green Finance Initiative’, can be found here: http://ow.ly/e6e030hdDdZ
  2. About the City of London Corporation:

The City of London Corporation provides local government and policing services for the financial and commercial heart of Britain, the 'Square Mile'. In addition, the City Corporation has three roles:

  • It supports London’s communities by working in partnership with neighbouring boroughs on economic regeneration, education and skills. In addition, the City of London Corporation’s charitable funder, City Bridge Trust, makes grants of around £20 million annually to tackle disadvantage across London.
  • It also helps look after key London heritage and green spaces including Tower Bridge, the Museum of London, Barbican Arts Centre, City gardens, Hampstead Heath, Epping Forest, Burnham Beeches, and important commons in London.
  • It also supports and promotes the ‘City’ as a world-leading financial and business hub, with outward and inward business delegations, high-profile civic events and research-driven policies, all reflecting a long-term approach.

See www.cityoflondon.gov.uk for more details.