During his first Mansion House speech, Rishi Sunak said he wishes to see Britain become a world leader in Green Finance. To do so, he is leveraging the financial services industry. He spoke about many ways this was to be achieved. Firstly, reforming capital markets. Secondly, seeking closer links with advanced and emerging financial centres. Thirdly, and for now finally, protecting access to cash.
What is Green Finance?
Green Finance covers a lot of ideas, initiatives, services and products (that will be discussed in this article) with the end goal of making Britain carbon neutral by 2050. Thinking beyond the net-zero 2050 goal, Green Finance could be developed further to help repair long term environmental damage.
How will Finance assist in Green Goals?
To start with, let’s talk about transparency. The Chancellor wants more information to be made accessible for reporting on environmental impacts. Seventy percent of people say they want their investments to have little or no negative impact on people or the planet. So, there is clearly public and investor support for Green Finance in our general culture. One aspect of Sunak’s plan is “to create a new sustainable investment label – a quality stamp – so that consumers can clearly compare the impacts and sustainability of their investments for the first time.”
The Government wishes to legislate and deliver this before COP26. (COP26 is the 26th UN Climate Change Conference, which is due to be held in Glasgow in 31 October – 12 November 2021.)
Green Finance for both Investors and Savers
The Green Gilt
Government gilts are specific to the UK. They are fixed interest loan securities issued by the UK government. In Sunak’s speech, he outlined plans for the UK to issue its inaugural Sovereign Green Bond (or ‘Green Gilt’) in 2021. There are many types of Green projects or Green Start-ups that will be eligible for this funding. For example zero emission buses, offshore wind power (and other green energy sources) and efforts to decarbonise homes, buildings, offices etc. In this financial year, the Chancellor has pledged £15 billion of Green Gilts to be issued. The list of qualifying projects should grow as the success of this initiative is realised.
Businesses wanting to “go green” can use the loan to expedite the process and get ahead of the game. With more private sector funding going to green projects, Britain should move forward towards a better, greener and net zero future.
Green Savings Bonds from NS&I
The Green Savings Bond is a world first innovation that could put the UK at the forefront of Green Finance. It is designed to fund green projects in the public sector. For example, building green power stations such as off-shore wind farms funded by citizens. Therefore your savings can support what you believe to be the best for the planet. Wishing to save money rather than borrow to invest? You could purchase Green Savings Bonds when they become available later this year.
They are set to be individual investments ranging from £100 – £100,000 per person. The bonds will be available to those 16 years and older with a fixed returns rate over a 3 year term. They will be a great option for those wishing to save their money and in turn make a small interest profit whilst supporting projects that will drive Britain to the forefront of supporting the environment.
The Goals and Purposes of Driving Forward Green Finance
As previously mentioned the ultimate goal is for Britain to be net-zero by 2050. More short term, however, the investments in Green finance are designed to help tackle climate change and improve our economy. This will be achieved by driving more finance into green projects. Initiatives such as replacing traditional fossil fuels with renewable energy sources; making private and public transport greener and reducing their emissions; reducing and preventing future pollution; using energy more efficiently and protecting natural resources. It could put Britain at the forefront of sustainability. This is innovative finance that the rest of the world could follow.