Green finance growing into a powerful force for good

A new report out today from TheCityUK and Imperial College Business School makes the case for the UK to better seize the opportunities presented by its position as a leading centre for green finance. It argues that the sector should become an integral part of mainstream financial markets and a core element of global capital markets.

The report also makes a major contribution to the understanding of the asset class by setting out a definition of what can and cannot be considered ‘green finance’.

Likening the excitement around green finance to the buzz around emerging markets 20 years ago, the report’s authors call for the wider financial services industry to take notice of this important, but often little-understood, asset class. They underline the UK’s pioneering role in developing green finance and emphasise the advantages of securing investment returns, while also delivering positive environmental outcomes.

Anjalika Bardalai, Chief Economist and Head of Research, TheCityUK, said,

Green finance is not charity and it’s not about hand-outs or subsidies. What it does is use the age-old premise of risk and return in the private sector to solve some of the world’s most pressing challenges. Just as emerging markets have entered the mainstream of investing over the past two decades, green finance is destined to become a core element of global capital markets in the coming years. The UK is well-placed to play a leading role in driving this forward because of its well-developed financial and related professional services ecosystem and clusters of environmental expertise.

Charles Donovan, Director of the Centre for Climate Finance and Investment, Imperial College Business School, said,

Green finance is exciting real interest amongst investors and policymakers. But without some basic standards, there’s a real risk that the term becomes meaningless. We define green finance as: ‘Funding for new capital and operating expenditures that generate measurable progress towards the achievement of a well-recognised environmental goal’. It’s the explicit link to an environmental target that drives market integrity.
Britain has played a key role in the development of the global green finance industry. The UK’s Green Investment Bank was one of the world’s first green banks and has played an important role as an investor in more than 100 green infrastructure projects totalling £3.4bn.

Anjalika Bardalai concluded,

The possibility of combining different innovative areas, such as FinTech, with green finance presents an opportunity for the UK to offer a new level of global leadership in this area. Given that climate change is fundamentally an international challenge, green finance is a sector that fits naturally with the UK’s extensive expertise as the leading international financial centre.

The report authors will be joined by Lord Browne, Executive Chairman L1 Energy and former Chief Executive Officer of BP, at Imperial’s ‘Business in the City: Business and Climate Change’ event on 20 September. This event will bring together academic and private-sector experts to discuss how climate change affects business and financial services and highlight the opportunity the UK has to build in its position as a leader in the area of green finance. To register your interest in attending, please contact TheCityUK’s press office.