Can the government’s green finance plans really get investment flowing?
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The government’s delayed plans to boost investment into the country’s net zero transition have divided opinion in the City today, with campaign groups and firms warring over whether the plans go far enough in their scale and ambition.
Among the measures announced are a number of reviews and policy consultations designed to kick on the country’s green push and slash emissions by 2030, with a firmer ‘green taxonomy’ regime taking top billing.
The blueprint also includes a goal of winning London the status of the world’s first ‘net zero aligned financial centre’.
However, the measures have been met with a mixed reception from analysts and the City.
‘Welcome road map’
Fund management trade body the Investment Association was among the groups to welcome the measures and said it provided a “welcome road map and certainty on the strategy to reach this goal”.
“Both public and private companies have their role to play in the transition, and we welcome the Government’s commitment to better track private investment in the net zero economy,” said the group’s director of investment and capital markets Galina Dimitrova.
“We particularly welcome the Government’s commitment to international consistency and the development of aligned approaches, which will support the flow of cross-border investment and benefit companies and savers in the UK and around the world.”
Firms in limbo
Analysts at big four firm EY said that the sector could still be left in limbo as it waits for a consultation on the much touted green taxonomy regime.
Gill Lofts, global sustainable finance leader at EY, said the plans will be “broadly welcomed” by the financial services industry, but firms would “still be waiting for the all-important UK Green Taxonomy consultation, which is now set for the Autumn”.
“The taxonomy outlined today is needed to support firms’ sustainable investment strategies and should bring consistency and transparency for both firms and investors, which is needed for real progress to happen,” she added.
She said “we’re still a long way from implementation” but firms would need to begin scoping out plans for implementation “to act swiftly when the time comes.”
‘All carrot, no stick‘
Some campaign groups have rounded on the plans for a lack of scale and breadth, however.
“Today’s announcement is lacking the vision and ambition needed to align the financial sector with the Government’s own ambition of reaching net zero,” said Lewis Johnson, a boss at ShareAction. “We had hoped for something bold and visionary, but this amounts to little more than a restatement of existing commitments.”
Wonks at the left-leaning New Economy Foundation similarly slammed the measures, saying they did little to “steer finance away from risky fossil fuel projects and towards vital green investments.” “It continues to rely on simply giving markets more information about climate risks so they can self-adjust,” said Lukasz Krebel, economist at the New Economics Foundation.
“This strategy refresh was an opportunity to outline a strong framework of regulatory, monetary and fiscal coordination which would actively shift financial flows to enable an economy which actively tackles climate breakdown and enables everyone to afford a good life.”