A UK green sovereign bond would finance the green recovery plans the Prime Minister outlined in his keynote speech this week, creating green-collar jobs across the country. The Green Finance Institute, Impact Investing Institute and the LSE Grantham Research Institute on Climate Change and the Environment have captured this opportunity in their Green+ Gilt proposal that emphasises the strategic potential for a green sovereign bond to scale up the UK’s drive to a net-zero carbon economy with well-defined social and economic benefits.
The proposal, presented to Her Majesty’s Government, has the support of 30 asset owners and investors, representing organisations with assets and assets under management of more than £10 trillion, and influential professional bodies.
The UK’s plans to deliver a resilient, net-zero economy will bring a range of positive social benefits in terms of jobs, skills and regional revitalisation. The Green+ Gilt proposal shows how the UK could issue a sovereign bond that captures these environmental and social benefits, attracting private sector capital to realise key policy objectives as the country recovers from the pandemic.
A Green+ Gilt would:
- Underpin economic recovery by directing proceeds to the growing net-zero economy – creating jobs and other social benefits.
- Address the lack of investment and productivity gap faced by the UK by upgrading infrastructure, supporting innovation and building skills.
- Show the UK as a market leader by developing the green and sustainable capital markets.
- Catalyse green and sustainable finance, and demonstrate UK financial capability, forming a template for further issuance by the private sector and localities.
- Establish a framework for further issuance domestically and internationally that can build economic confidence on the road out of the Covid-19 crisis.
- Appeal to the deep pool of UK and international green investors increasingly focused on social outcomes and be accessible to pension funds and other pools of savings.
Sarah Gordon, Chief Executive of the Impact Investing Institute, says: “Issuing a Green+ Gilt would help the City maintain a competitive edge in sustainable finance, directing capital to address the UK’s social and environmental challenges, and setting an example for businesses to follow.”
Nick Robins, Professor in Practice – Sustainable Finance at the Grantham Research Institute, London School of Economics and Political Science, says: “The Green+ model is one that is not only suited for the UK, but could be an attractive approach for sovereign bond issuance by other countries, generating financial momentum in the run-up to COP26.”
Dr Rhian-Mari Thomas, Chief Executive of the Green Finance Institute, says: “This is the time for the UK to showcase our ambition in green and sustainable finance. Issuing a Green+ Gilt will provide finance for green infrastructure, create green jobs and catalyse the sterling green and social bond market.”
The proposal was developed with active engagement from asset owners, investment managers, and other fixed income market participants. It was presented to the Government with a letter of support from Emma Howard Boyd, Chair of the Environment Agency, Professor Lord Nicholas Stern, IG Patel Professor of Economics and Government, and Chair of the Grantham Research Institute at the London School of Economic and Political Science and William Russell, Lord Mayor of the City of London.
Peter Harrison, Chief Executive Officer at Schroders, says: “We would welcome the UK government issuing a Green+ Gilt. It would be a clear commitment to the environment, to both investors and future generations. It would help attract further capital into this important area. Financing greener infrastructure and jobs are long-term investments that will support sustainable economic growth.”
Katie Murray, Group Chief Financial Officer at NatWest, says: “Tackling climate change and social inequality are shared problems that require global collaboration between governments, companies and individuals. A Green+ Gilt would help to position the UK as a leader on these issues and deliver a greener and more inclusive economy for our country.”
Simon Bond, Director of Responsible Investment Portfolio Management at Columbia Threadneedle Investments, says: “Following the Covid-19 pandemic there is an urgent need to support both a green recovery and level up infrastructure spending across the country. We have seen robust commitment from the investor community to invest in bonds that directly address the impacts of the pandemic and support affected communities. We believe that both investors and the wider society would welcome, with open arms, a liquid green UK sovereign bond with clearly defined social benefits such as the proposed Green+ Gilt.”
Notes to editors:
The 30 investors, asset owners and organisations who signed the letter of support include:
Affirmative Investment Management
Allianz Global Investors
AXA Investment Managers
Association for Financial Markets in Europe
Brunel Pension Partnership Ltd
Coal Pension Trustees
Confederation of British Industry (CBI)
City of London Corporation
Columbia Threadneedle Investments
NN Investment Partners
Institutional Investors Group on Climate Change (IIGCC)
International Chamber of Commerce (ICC), UK
Impax Asset Management
Legal & General
Legal & General Investment Management
London Stock Exchange Group
Pension Protection Fund
Principles for Responsible Investment (PRI)
UK Sustainable Investment and Finance Association (UKSIF)
Additional quotes contained in the Green+ Gilt Proposal include:
“As hosts of COP26, the world is looking to the UK as we continue to show leadership and ambition with regards to green finance. A Green+ Gilt, which so clearly aligns green investment with social and economic benefits throughout the UK, would provide such a globally important signal, whilst supporting the further development of a sterling green bond market here in the City of London.” William Russell, Lord Mayor of the City of London
“The UK needs a strong and sustainable recovery from Covid-19. A Green+ Gilt is a key instrument that the Government should deploy to help channel savings into programmes and projects that enable us to build back greener in the places that need it most. It can signal the direction of future opportunities and reduce perceived risk. Now is the time to be ambitious. Green investment can have rapid impact and drive strong and sustainable growth.” Professor Lord Nicholas Stern, IG Patel Professor of Economics and Government, and Chair of the Grantham Research Institute, London School of Economics and Political Science
“Acting on this proposal would show real UK leadership in green finance by bringing to market a green sovereign bond that has clear social impact characteristics. There is huge appetite for more sustainable finance investment opportunities. The UK must continue to develop its competitive edge in delivering financial solutions to some of the most pressing social and environmental challenges facing the world today.” Miles Celic, Chief Executive, CityUK
“The proposed Green+ Gilt has the potential to be a world-leading sovereign instrument by closely aligning green and social objectives. It provides a mechanism for unlocking a wall of investment, across the UK, into building resilience and our net zero and sustainable future.” Emma Howard Boyd, Chair, Environment Agency
“A Green+ Gilt that combines green investment with clear social and economic benefits will reinforce the UK’s reputation as a centre for financial innovation, while mobilising capital that will benefit both people and planet. As well as being a clear signal of commitment to building back better it will catalyse wider green+ bond issuance ahead of COP 26.” Dame Elizabeth Corley, Chair, Impact Investing Institute and Board Member, Green Finance Institute
“AFME members would warmly welcome the innovative Green+ bond structure that combines Green and socially sustainable investment opportunities and supports inclusive growth.” Michael Cole-Fontayn, Chairman, Association for Financial Markets in Europe
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About the Green Finance Institute
The Green Finance Institute is an independent, commercially focused organisation, supported by Her Majesty’s Treasury, the Department for Business, Energy and Industrial Strategy, the Foreign, Commonwealth and Development Office and the City of London Corporation. As the UK’s principal forum for public and private sector collaboration in green finance, it is uniquely placed to mobilise capital to accelerate the domestic and international transition to a sustainable, net-zero carbon economy that is also climate resilient. The Green Finance Institute convenes and leads mission-led coalitions to identify and unlock barriers to deploy capital at pace and scale towards impactful, real-economy outcomes. For more information visit greenfinanceinstitute.co.uk and follow the Institute on Twitter and LinkedIn.
About the Impact Investing Institute
The Impact Investing Institute is an independent, non-profit organisation which aims to accelerate the growth and improve the effectiveness of the impact investing market in the UK and internationally. It does this by raising awareness of, addressing barriers to and increasing confidence in investing with impact. Our vision is for lives to improve, as more people choose to use their savings and investments to help solve social and environmental challenges, as well as seeking a financial return. The Institute is supported by the Department for Digital, Culture, Media & Sport, the Foreign, Commonwealth & Development Office, the City of London Corporation and several supporters from the financial service industry. For more information visit www.impactinvest.org.uk and follow the Institute on Twitter and LinkedIn.
About the LSE Grantham Research Institute on Climate Change and the Environment
The Grantham Research Institute on Climate Change and the Environment was established in 2008 at the London School of Economics and Political Science. The Institute brings together international expertise on economics, as well as finance, geography, the environment, international development and political economy to establish a world-leading centre for policy-relevant research, teaching and training in climate change and the environment. It has an active body of work on sustainable finance, including carbon assessment, central banks, the just transition, resilience and sovereign bonds. It is funded by the Grantham Foundation for the Protection of the Environment, which also funds the Grantham Institute – Climate Change and Environment at Imperial College London. For more information visit www.lse.ac.uk/grantham/ and follow the Institute on Twitter@GRI_LSE