Green finance is set to be the new emerging markets for investors, according to a report out today forecasting it will become “a core element of global capital markets”.
TheCityUK and Imperial College Business School report also suggests that London is “well-placed to play a leading role” in the market. The UK already has $61.8bn (£45.7bn) of green bonds in issuance, a nine per cent share of the global market.
“Green finance is not charity and it’s not about hand-outs or subsidies,” said Anjalika Bardalai, chief economist and head of research at TheCityUK. “What it does is use the age-old premise of risk and return in the private sector to solve some of the world’s most pressing challenges.
“Just as emerging markets have entered the mainstream of investing over the past two decades, green finance is destined to become a core element of global capital markets in the coming years.
“The UK is well-placed to play a leading role in driving this forward because of its well-developed financial and related professional services ecosystem and clusters of environmental expertise.”
As well as highlighting UK’s strong position in the green bond market, with 14 listed on the London Stock Exchange last year alone, the report also drew attention to the work of the Green Investment Bank. Now the Green Investment Group, it has invested in more than 100 green infrastructure projects totalling £3.4bn.
The report also seeks to define green finance, acknowledging that few understand it fully. “Green finance is exciting real interest amongst investors and policymakers,” said Charles Donovan, director of the centre for climate finance and investment at Imperial. “But without some basic standards, there’s a real risk that the term becomes meaningless.
“We define green finance as: ‘Funding for new capital and operating expenditures that generate measurable progress towards the achievement of a well-recognised environmental goal’. It’s the explicit link to an environmental target that drives market integrity.”