Monday 2 March 2020 4:29 am

If Britain is to hit net-zero, we need the City to step up its green finance ambitions

The unveiling of the COP26 Private Finance Agenda at Guildhall last week was a landmark moment for our climate change efforts as a nation.

The annual UN conference, this year taking place in Glasgow, will convene global leaders to discuss the world’s most pressing issue.

And as policymakers gear up for the pivotal event, it is welcome that our own government has put finance at the heart of the conference for the first time.

But even with the weight of Westminster behind our climate efforts, more must be done. The private sector will be crucial to mobilising the monumental amount of capital needed to achieve an orderly transition to a net-zero future. 

Some $90 trillion is needed by 2030 to realise our international climate ambitions, and we are currently only generating billions. The clock is ticking.

Fortunately, the City has form in adapting to overcome the biggest challenges. A new chapter that is distinctly green needs to be added to our long history of innovation.

Green finance places climate concerns at the heart of financial decision-making. It allows us to mitigate risks and capture the abundant opportunities that a green future presents.

And there is evidence of that already. The London Stock Exchange is home to 218 sustainable bonds which have raised over £40bn. Last year, London came top in the Z/Yen green finance global rankings.

Conversations on green finance are happening here that simply are not taking place elsewhere. London’s talent, depth of capital markets, and scale of innovation mean that we are ahead of the game in critical products like transition bonds.

We are on the way there with our efforts. But private sector capital is a big piece of the puzzle that needs to be found for our transition to net-zero. London is already leading the way, but investors must do more.

And with finance as its cornerstone, the COP26 agenda takes heed of this. The agenda recognises the major financial opportunity green finance presents, focusing minds on the potential returns: making profit and mobilising capital. 

All parts of the City must play their part — whether that is through structuring transition bonds, developing new forms of insurance in an increasingly uninsurable world, or building climate-friendly investment portfolios.

Last week’s COP26 launch highlighted the need for a colossal undertaking of both the public and private sectors. But we know that City firms are highly engaged and ambitious for September’s event. That is why the City Corporation and Green Finance Institute are working tirelessly across government and industry to advance the role of finance in it.

The stark truth is that unprecedented climate events are happening with alarming regularity. Long gone are the days when climate change was merely a scientific assessment. Today, it is an increasingly evident reality.

The stakes have never been higher, but the City’s mission is clear: to mobilise capital with pace and at scale, financing the domestic and global transition to a net-zero future.

Main image credit: Getty

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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