What you need to know about the UK’s Green Finance Strategy
The UK government recently released its Green Finance Strategy, which sets out plans to align financial markets with UK climate targets and mobilise investments in climate-aligned projects. The document updates a previous green finance strategy and for the first time incorporates nature and climate adaptation. The strategy details planned regulations and tools to support measurement and transparency of climate risks and opportunities as well as new funding schemes to spur green investments by the private sector.
What is the UK Green Finance Strategy?
The Green Finance Strategy sets out an approach to strengthen the UK’s leadership in the global green finance market, including how the government will pursue its ambition for the UK to become the world’s first Net Zero-aligned Financial Centre, and enable the necessary investment to meet climate targets.
Green finance refers to investments and finance that support the delivery of environmentally friendly initiatives. Government focus on this was bolstered by the UK’s COP26 presidency in 2021. Green financing is essential to decarbonizing economies and achieving future resilience. The Intergovernmental Panel on Climate Change (IPCC) estimates that limiting warming to 2°C will require around USD3 trillion annual investment through 2050.
Making the UK a Net Zero-aligned Financial Centre will mean that financial firms align their portfolios with domestic and global Net Zero objectives. That alignment also depends on the companies in their portfolios adhering to robust transition plans–plans that will soon be mandated by the UK government to ensure they are in line with economy-wide targets. Finance plays a critical role in enabling industry decarbonization and resilience. To deliver on the UK’s Net Zero ambitions alone, an additional GBP50-60 billion of annual investment will be required each year through the 2030s.
With increasing attention on the intensifying and accelerating impacts of climate change, including last year’s heat waves in the UK, the updated Green Finance Strategy recognized the need to scale up adaptation finance. The strategy commits to working with industry partners to develop adaptation metrics and guidance to improve the approach to climate resilience assessment and disclosure. The intention is to set out this approach, along with adaptation finance deliverables and an action plan, as soon as 2024. There is also a commitment to set out a five year strategy to build UK climate resilience in the third National Adaptation Programme in 2023.
The strategy acknowledges the decline in nature and the importance of nature-positive investment to halt this decline. It points to World Economic Forum research showing that over half the world’s GDP is ‘moderately’ or ‘highly’ dependent on nature. The strategy incorporates nature and climate adaptation into the green finance framework to provide the finance sector with the information it needs to manage risks from nature loss and climate change.
Other key features
Other plans in the report include:
Mobilize UK public financing institutions such as the UK Infrastructure Bank (GBP22 billion of financial capital), British Business Bank, and UK Research and Innovation to incorporate climate into their investment strategies
Develop best practices for transition plans led by the Transition Plan Taskforce (TPT). Transition plans detail organisations’ decarbonization roadmap. The intention is for a consultation to take place in autumn/winter 2023 once the TPT has finalized its framework
Support the work of the new standard-setting board the International Sustainability Standards Board (ISSB) and assess standards for their suitability for adoption in the UK (summer 2023)
Deliver a UK Green Taxonomy so investors have definitions of ‘green’ economic activities. This will support the quality of standards, labels and disclosures used in the industry for green finance activity with consultations taking place in autumn 2023.
How does climate intelligence support the UK Green Finance Strategy?
Cervest’s Unified Climate Intelligence (UCI) platform enables enterprises, public bodies and financial institutions to measure interconnected climate risks and opportunities on built infrastructure and natural capital assets such as grasslands, forests, or wetlands. These insights are designed to be actionable for decision-makers across the economy, enabling integrated climate adaptation, mitigation, and nature-positive action. For UK financial sector actors, climate intelligence provides a foundation of science-based insights to drive urgent, bold, and effective action that bolsters the UK’s green finance leadership.
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