The net zero transition is one of the biggest investment opportunities for the UK. Benefits include growing the low-carbon economy, creating tens of thousands of jobs, and unlocking private investment to new and sustainable markets. However, the financial services sector and the real economy need a clear set of signals, targeted support and investment from the government to be able to capture these opportunities. Failing that, the UK’s position as a world-leading provider of net zero expertise and technology is at risk.
The UK has led the way on green finance. It has committed to creating the world’s first Net Zero Financial Centre and a Net Zero Financial System, and implementing several progressive green finance reforms. However, the UK is yet to set out a comprehensive plan for how it will deliver finance for the transition across the country. The 2022 Green Finance Strategy must set out how the UK will invest to reach net zero by 2050, harnessing all the levers at the government’s disposal.
E3G’s latest briefing outlines 6 design principles for the Green Finance Strategy, together with 11 flagship policy commitments underpinned by success indicators. These will be critical pillars of a world-leading financial system. They are also critical to ensuring the UK is energy secure, supports UK businesses by moving first on the net zero transition, and protects families and communities from future crises.
Flagship policies for a successful Green Finance Strategy
- Fulfil the commitment in the Net Zero Strategy by establishing a permanent, independent observatory to track public and private financial flows across the economy against the UK’s Net Zero and Adaptation targets. Use this analysis to help develop a comprehensive net zero investment strategy.
- Commit to integrating climate change into UK economic management and public finance and delivering strategic public investment to key sectors across the economy to support the transition.
- Tackle greenwash by creating a 1.5 °C-aligned science-based taxonomy for what is and is not considered a green economic activity. Use this to underpin guidance for private finance and public budgets.
- Support private sector appetite for transitioning. Set out a clear timeline for when transition plan requirements will be extended across the economy and deliver clear and specific guidance to support implementation.
- Establish a robust, science-based regulatory and legislative framework to enable finance sector flows to be greened, and aligned with net zero and nature outcomes
- Embed UK adaptation targets and biodiversity goals in corporate, financial sector and government transition planning.
- Support cross-UK prosperity by centring just transition principles in the strategy, including supporting local authorities and investing in a fair transition for legacy industries.
- Leverage the UK’s diplomatic influence to secure international ambition for private sector financial reform, including building on G20 language to secure a commitment at the G7 to create net zero financial systems.
- As a key shareholder in international financial institutions, including Multilateral Development Banks (MDBs) and the IMF, support MDBs and Public Banks in mainstreaming net zero and resilience.
- Use the UK’s international climate leadership to upgrade the international financial architecture that developing countries rely on to help them cut emissions whilst reducing their debt.
- Increase public and private investment mobilisation to achieve 2030 climate and nature targets in emerging and developing economies.
For more detailed information on these policies, see E3G’s response to the Green Finance Strategy Review consultation.