Leeds Climate Commission and Green Taskforce come together to accelerate green finance growth in the City

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On Tuesday (1 May) Leeds Climate Commission is hosting a conference to encourage green finance opportunities.  It is open to the business, investor, developer and advisor community focusing on how sustainable growth can be affordable and good for business.

Walker Morris partner discusses some of the key themes of the event.

The conference will focus on facilitating a pipeline of replicable good value projects and sources of finance that make them attractive to implement.

Joining representatives of the Commission to discuss opportunities and share insights and experience will be representatives of Iona Capital and Sustainable Development Capital Ltd as well as Abundance which is known more recently for its Bond raising for Swindon Council to deliver carbon saving projects. Representatives of the Green Finance Taskforce, an independent partnership of public and private sector bodies) will also be present to reinforce the messages coming from their recent Report to Government Accelerating Green Finance. This sets out recommendations under 10 themes of how to improve the growth of green finance and improve the UK’s transition to a low-carbon economy. Green Finance covers investment in a range of infrastructure and services – creating new skills and jobs and in turn contributing significantly to economic growth. It is no stranger to the UK economy with over $20 billion having been raised in London alone through Bond issues with much more invested in more traditional investment and lending.

The Taskforce’s message is:

Relaunch UK green finance activities through a new unified brand

The Government and the City of London should set up a Green Finance Institute. The Institute would be a new brand to harness the UK’s existing capabilities and create new business opportunities in green finance. Part of the Institute’s role would be to develop a joint strategy with the Government and set up a Green Fintech Hub to support UK leadership in finance and digital technology solutions in the green finance space; this will help the UK deliver on its clean growth strategy.

Improve climate risk management with advanced data and analytics

Climate change risk is not fully incorporated into business risk management, valuations and decision making practices. For example, high temperatures, increased/decreased rainfall and windstorm intensity are increasingly affecting the insurance market with a greater occurrence of catastrophic events.

Utilising technology, data and analytics to understand climate change impacts will help manage these risks and focus on this area would help the UK to design and sell innovative new products in this space which would further build the UK’s international reputation.

Implement the recommendations of the Task Force on Climate Related Financial Disclosures (TCFD)

Companies and investors need better information to make informed decisions about the impact of climate risks to their business and capital investments. The recommendations from the private sector-led TCFD, provides an internationally agreed framework to help assess, reduce and manage the exposure to climate risk.

Drive demand and supply for green lending products

Buildings (residential, commercial and public) account for 30% of the UK’s total greenhouse gas emissions so tackling this issue and boosting energy efficient renovations should be a major part of the strategy to meet carbon targets.

Promoting green mortgages and a loan market for renovation is an important way of boosting investing in this area. For example, in the Netherlands mortgage lending rules allow households to borrow up to £25,000 extra to purchase/refurbish a home to a net zero energy efficiency level. In the US, offering lower interest rates on mortgages for energy efficient properties is another strategy to promote building efficiency. Expansion and strengthening of the Energy Performance Certificate programme is supported.

Boost investment into innovative clean technologies

Through providing public funds to start-ups in the early stages of their development, which in turn encourages venture capital funds to invest as it reduces the quantity of seed capital required. Furthermore, the collaboration of the public sector working with the private sector can accelerate the speed at which the company’s innovation is commercialised. This is against a backcloth of concern that UK investment in cleantech has declined since 2013.

Clarify investor roles and responsibilities

Clarifying fiduciary duties are an essential way to ensure the UK financial system responds proactively to climate change risk as well as to the opportunities for clean growth. These duties should be framed to encourage appropriate investment behaviour; the aim needs to be to promote good fund governance on environmental, social and governance issues (ESG).

Issue a sovereign green bond

Developing a UK Sovereign Green Bond Framework under which a single sovereign green bond or bond programme could be issued would help secure the UK’s green growth and innovation goals while also signalling a consolidation of UK leadership in green finance. The proceeds raised from green bonds would then be used as additional sources of capital, to be invested in new environmentally friendly projects that may not otherwise get funded or built.

Build a green and resilient infrastructure pipeline

Currently, the UK is delivering less than half of the green infrastructure projects required to meet its environmental targets. The Report encourages the UK to secure major investment to renew and decarbonise its infrastructure but also make sure it is resilient to the impacts of a changing climate. The Government should publish a National Capital Raising Plan explicitly designed to align UK infrastructure planning with the delivery of its Clean Growth Strategy and environmental plan laying out the pipeline of these projects over the next 5, 10 and 15 years and setting out clean infrastructure and regional development priorities.

Foster inclusive prosperity by supporting local actors

Local authorities are well placed to drive emissions reductions through their unique position of managing policy on land, buildings, water, waste and transport. – Therefore a major part of the clean growth strategy needs to involve local authorities embedding low carbon, energy efficient measures across areas like health and social care, transport and housing. The Report recommends the setting up of a Local Development Finance Fund of £100m that would award capital grants to applicants seeking to create new forms of public-private consortia to bridge the development gap and unlock an estimated £30bn of potential clean growth infrastructure projects.

Integrate resilience into the green finance agenda

Ensuring the UK is resilient to the effects of a changing climate would create significant new green finance opportunities that would enable the UK to lead the world in this area i.e. on how to deliver a resilient economy while boosting green finance opportunities. For example, the floods in 2015 cost £1.3bn in damage yet the number of assets in high risk flood areas will increase by at least 50% by 2050 so the Government needs to establish a national resilience unit to meet these challenges and produce an action plan on delivering market resilience.

The Commission’s approach sits in a wider context of progress of the Northern Powerhouse and related industrial Strategy and a recent IPPR Report on the role of the North in becoming a market leader in the new energy economy.


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