July marks the release of the UK government’s Green Finance Strategy: Transforming Finance for a Greener Future. We’re excited to see the government taking these steps towards sustainability and wanted to break down what this means for business across the UK.
According to the report summary they hope the strategy will help in:
- “Aligning private sector financial flows with clean, environmentally sustainable and resilient growth.”
- “Strengthening the competitiveness of the UK financial services sector”
Some other goals mentioned at the beginning of the strategy include the mainstreaming of green investing, building robust and transparent policies around green financial markets and being at the forefront of green investing. The UK has set a target of 2050 to reach net zero greenhouse gas emissions, which is a very ambitious goal, so they’ve laid out a framework for how they see us reaching it.
The report splits the strategy into three categories, which we will try to summarise below.
It’s time for finance to start making decisions with the environment in mind. By 2022 the UK aims to have all listed companies and large asset owners disclose in line with the TCFD (Task Force on Climate-related Financial Disclosures) recommendations.
The strategy emphasises the need for a greater depth and transparency with sustainability data in order to make financial decisions based on environmental impact. This could incorporate ESG data and other benchmarks that tell us whether a business is hurting or helping the environment, allowing the financial sector to make better decisions about where to invest.
The second initiative is to invest in green energy and remove barriers that prevent financing of green projects. This includes looking at the types of energy that businesses use and designing a way for these details to be disclosed.
Capturing the Commercial Opportunity
The strategy aims for the UK to be a leader in “green financing” and “financing green”, therefore seizing the opportunities that arise from a transition to a greener finance world. A statement from the government says that “The UK has shown that going green can be a win-win, reducing emissions by 42% while growing the economy by 72%, making the country the strongest performer in the G7.”
What does this mean for UK businesses?
From our point of view, this means even more accountability from businesses on their environmental and sustainability policies and practices. Markets have already begun to move money towards the greener options, as consumers demand this, but having the additional support of the government strategy will continue to push green investing.
As a result, UK businesses have no time to waste on getting in line with sustainable practices. If they want to remain financially strong and garner investment, they will need to prove that they are doing everything in their power to mitigate their environmental impact.
What, exactly, the government will require from businesses is still a little unclear as they define roles and responsibilities of public and private sector, but there are some initiatives we believe businesses could be taking right now to get ahead of the game:
- Understand what effect climate change has on your business (potential natural disasters, increase in temperatures, etc.)
- Evaluate and be transparent about your environmental impact
- Set emission reduction goals and steps towards reaching them
- Work with green energy providers
- Make green investments (by asking for disclosure of sustainability data)
- Reduce waste wherever possible – finding opportunities to move away from a linear economic model and toward a circular one
The government hopes that this strategy will help to ‘decarbonise’ the economy – making it easier for businesses to move away from a linear take-make-waste model and towards a lower carbon, circular one. This will mean a decoupling of production volume from economic indicators (like GDP), which we believe is long overdue.
“The UK has a long history of leading the way in tackling climate change, but we need to do more to protect our planet for future generations. The City [of London] has a vital role to play in securing a greener future for us all. By investing more in sustainable projects it can not only protect our environment, but also help establish London as the preeminent international centre for green finance. Today’s Green Finance Strategy will support this ambition, with new initiatives to boost funding for green ventures and ensure the environment is at the centre of all financial decision-making.”