Sunak is right to explore ways to deliver net zero in a climate of financial insecurity, but we can’t put off the transition to a green economy, writes Nicholas Lyons.
Growing the economy and addressing the risks of climate change are two of the biggest challenges facing the UK. Neither is optional, nor can they be deferred. Rishi Sunak is right to explore how we deliver solutions within a fiscally constrained environment. This is the conundrum facing many nations. But the transition to a sustainable economy also represents the greatest growth opportunity of the 21st century.
The City of London Corporation’s latest report, Vision For Economic Growth, reflects the feedback from over 300 organisations and individuals operating in the Square Mile; it pinpoints the tangible benefits of a just transition – specifically up to £100bn of private sector capital leveraged by 2030 to drive towards net-zero. But policy clarity and certainty are essential to give the confidence necessary to the private sector to unlock that investment. The UK has a history of pioneering sustainable finance from green bonds to ESG, from developing carbon markets to structuring sustainable infrastructure projects. London also currently sits at the top of the Global Green Finance Index.
There is no room for complacency. Global demands and pressures on nature have dramatically increased, posing significant economic risks and asking serious questions of investments into nature-related initiatives to preserve biodiversity. Businesses and financial institutions in the UK and across the world are becoming increasingly aware of nature-related risks within their supply chains and the emerging regulatory, consumer and investor response.
Every company depends on nature to some extent – providing resources such as wood and water, services including protection as when a wetland mitigates floods and purification when trees remove pollutants from the air. The natural world is essential to our livelihood and wellbeing, therefore it is no surprise that nature loss by 2030 could cause global GDP reductions of £2.1tn each year.
There is great momentum behind this. Just last week, the Taskforce on Nature-Related Financial Disclosures (TNFD) announced its final recommendations taking a significant step in holding companies to account for reporting nature-related risks, dependencies and impacts.
Nature must be at the heart of the UK’s future. The UK should be a trailblazer in the mobilisation of financial resources for nature to tackle climate change and preserve biodiversity as well as creating jobs and generating returns for investors.
One estimate suggests that closing the financial gap to achieve nature-related outcomes targeted in UK policy will require a minimum of £44-97bnn by 2032. This figure should not only be looked at as challenge for the economy but also an opportunity for the public and private sector.
The 2022 Kunming Montreal Global Biodiversity Framework (GBF) agreement was deemed the “Paris moment for nature” as leaders from across the world convened over a vision of living in harmony with nature.
The UK can take the lead in nature finance and emerge as the go-to partner for firms and countries across the world seeking to transition, protect biodiversity and deliver on other sustainability-related objectives. Additionally, in the UK’s drive to boost its competitiveness, sustainable finance is integral to securing our position as a leading global financial centre which excels not only in our historic strengths like insurance and asset management but also in emerging areas such as developing strategies to decarbonise economies.