Financial institutions need access to clients seeking green finance in the UK and internationally. Addressing greenwashing is also important. New sustainable finance products are gaining in popularity, including with retail investors, and are a growth opportunity for the UK. But their success depends upon there being confidence in the credibility of the underlying investments. The credibility of those underlying investments will improve dramatically if the wider policy, technology, and business risks of those underlying investments are addressed. Efforts by government and regulators to improve investment labels and disclosures are welcome and the green taxonomy – a framework classifying economic activities deemed to contribute to a jurisdiction’s environmental objectives– should also help, but further actions will be needed to address ongoing concerns, and the use of robust independent assurance will likely need to become more widespread.
To develop the UK’s home market for green finance and sustainable finance, policymakers should:
- Increase the number of UK businesses which report accurate Greenhouse Gas (GHG) emissions data and transition plans by expanding the types of UK businesses that need to report their transition plans and direct and indirect GHG emissions. Ensure that the UK Sustainability Disclosure Requirements (SDRs) recognise the importance of transition, by distinguishing between green and transitioning activities.
- Work with financial and professional services businesses to increase support, communication and guidance for SMEs, retail customers and consumers to assist with data gathering, understanding and support for the transition to net zero.
- Establish a UK regulatory framework for carbon and environmental credit markets that includes a standardisation of methodologies for carbon and environmental credit certification. This will make the UK a global carbon trading hub by ensuring transparent and accurate carbon pricing. This will increase confidence for businesses to offset their carbon emissions and invest in CO2 reduction and removal projects that support the net-zero transition.
- Deliver effective, quantified, detailed and long-term national net zero policies, incentives, and regulations for the wider UK industries with high emissions that are hard to abate, with considered sector pathways and transition plans to account for the time and resources needed to develop and implement low carbon technologies.
- Develop and publish interim national net zero capital raising plans, to set out the UK’s investment needs to 2030/2035 and how the UK intends to raise the capital required.
The UK government should ensure UK-based green and sustainable finance businesses have access to global clients by:
- Working with other governments to develop similar regulatory approaches to environment, social and governance (ESG) disclosure standards, ESG ratings, and green taxonomies.
- Advocating that international taxonomies should follow a principles-based regulatory framework and share common definitions for green and sustainable finance activities.
- Agree Youth Mobility Schemes that allow young green finance practitioners to train in the UK before returning home with enhanced understanding of UK green finance capabilities.
- Use Overseas Development Assistance (ODA) projects to advise developing country governments on how to develop green and sustainable regulation and attract sustainable investment. Industry is ready and eager to support such development projects.
- UK Export Finance should support more green and sustainable development financing, especially when an international green technology company is considering a UK listing.
- Agreeing Free Trade Agreements with commitments on business mobility and the recognition of UK professional qualifications so that UK green and sustainable finance practitioners can provide global businesses with expert green advice.
- Work with other governments to shape an international carbon price floor.