London has retained its crown as the globe’s greenest finance centre in a sign the City will help drive the world’s push to transition to a net-zero economy, a closely watched index released today reveals.
The capital’s deep green finance market and its high use of renewable energy to power the Square Mile led it to top the ninth edition of Z/Yen Group’s Global Green Finance Index.
The City topped every category in the index, underscoring its rapid adoption of greener approaches to finance.
London muscled out all its European rivals despite gloomy forecasts predicting Brexit would lead to a watering down of standards in the UK’s financial services sector.
Amsterdam, which has been characterised as London’s closest competitor on the Continent to snatch its place as Europe’s top finance hub, came second, while Zurich came sixth.
The Treasury launched Britain’s first ever green bond last September, raising £10bn to fund projects that tackle climate change by strengthening the country’s clean transportation and renewable energy infrastructure.
This issuance was followed by a further tranche of green bonds offered by the government-backed National Savings and Investments (NS&I).
A doubling of the bond’s return to 1.3 per cent – among the best rates in the savings market – in February led to an inflow of around £173m into NS&I’s green debt.
The capital has also been a leader in driving environment, social and governance (ESG) issues up money managers’ agenda, boosting its green credentials.
Harnessing private capital has been cast as crucial to ensuring countries hit net-zero targets due to governments having limited fiscal firepower to meet the cost of decarbonising their economies.
Experts said governments issuing green bonds is an efficient way of reaching net-zero goals by tying them to long-term commitment to drive down emissions.
“The use of these policy performance bonds may be key to addressing the risk of political instability through a long-term commitment by counties to achieving their sustainability goals,” Professor Michael Mainelli, executive chairman of Z/Yen Group, said.
Failure to secure returns on green investment projects would result in government’s struggling to meet debt obligations, strengthening incentives to shape policy that favours greener methods of production.