In May 2022, BEIS, DEFRA and HMT published a call for evidence ahead of the UK government’s update to its Green Finance Strategy, expected later this year. The paper covers four main objectives:
- capturing the opportunity of green finance
- mobilising finance for the UK’s energy security, climate and environmental objectives
- greening the financial system
- leading internationally
We welcome this timely consultation and believe that this review provides policymakers with an excellent opportunity to promote the UK as a leading global centre for green finance. Our response makes several key recommendations, including:
- Creation of a comprehensive bond standard that recognises the social co-benefits generated by green bonds, and continuous development of gilts and corporate bonds, including retail bonds, that align with this standard.
- Integration of the concept of ‘double materiality’ into UK financial reporting standards.
- Clarification of pension scheme fiduciary duties by DWP and DLUHC, to includeconsideration of the impact of investments on society and the environment. This would help mobilise more capital towards the transition, including helping government reach its target of 5% local investment by Local Government Pension Schemes.
- Establishment of a Social Technical Advisory Group, compiled of institutional and social investors to advise on a comprehensive framework of social metrics for investors and businesses to apply.
- Exclusion of natural gas activities in the UK’s Green Taxonomy.
- Inclusion of a robust ‘impact’ label, applicable to both listed and private markets, as part of the FCA’s development of a sustainable finance labelling system.
- Placement of private capital mobilisation at the core of the targets and remuneration structure (i.e., beyond only being part of the mandate) of financial institutions accountable to government (domestically and internationally, including those of which it is a shareholder), such as British International Investment, the British Business Bank and the UK Infrastructure Bank.
- Support for such organisations to increase deployment of blended finance instruments and tools.
- Integration of the concept of the ‘just transition’ in the transition plan frameworks being developed by the Transition Plan Taskforce.
- Support for and encouragement of place-based impact investing, including by giving local government a clear mandate to take a local, place-based approach, and providing it with in-house expertise or the opportunity to use external professional support at little or no cost for early-stage projects.
- Support for the mobilisation of capital at scale into emerging markets, including through initiatives that strengthen emerging market capital market infrastructure, size, and depth – e.g., the FCDO’s MOBILIST programme.
You can read our full response below.