LONDON, 6th April 2023
Experts have warned that the government’s new Green Finance Strategy is “missing any meaningful action on winding down financing of fossil fuels”.
Experts have written to Energy Security and Net Zero Minister Grant Shapps to express concern that despite Rishi Sunak’s promise to make London the first ‘Net Zero Financial Centre’, progress has stalled in key areas. The UK’s Taxonomy of ‘green’ activities has been repeatedly delayed, the Spring Budget did not allocate any new net zero public investment, and Bank of England action to integrate climate into its monetary and financial policy operations has stalled.
The letter acknowledges that the long-awaited update to the government’s 2019 Green Finance Strategy contains positive ‘signals’ including the promise of new “net zero investment roadmaps”, but argues that creating sustainable investment opportunities is no substitute for stronger regulation to curb fossil fuel financing.
Amongst ten urgent ‘next steps’, signatories urge the government to give regulators statutory objectives for net zero alignment and nature protection, increase green public investment, boost the capacity of the UK Infrastructure Bank, and make both climate and nature transition plans mandatory (eradicating the “comply or explain” loophole) for all large companies and financial institutions.
The strategy acknowledges that “climate change and environmental degradation pose profound risks to the economy”. The experts point to the recent failures of the Silicon Valley Bank and Credit Suisse to underscore the need for robust regulation to safeguard the public and avoid publicly funded bailouts, and urge the government to support the Bank of England in accounting for the high risks associated with fossil fuel projects in its capital framework.
Fran Boait, Executive Director at Positive Money, commented:
“The government’s “energy security day” was a damp squib, and the green finance strategy was no exception, showing just how out of touch this government is with households facing skyrocketing energy and food prices because of their addiction to oil and gas.
“Capital needs to move rapidly and at a colossal scale for us to have any hope of staying within 1.5C, and the government seems to think banks, asset managers and pension funds are going to wake up one morning and facilitate this shift voluntarily.
“A truly green strategy for the UK’s financial sector would not only incentivise sustainable investment but take responsible action to shift finance away from big polluters, including supporting the Bank of England to reflect the high risk of fossil fuel lending in its capital framework.”
Lukasz Krebel, economist at the New Economics Foundation, commented:
“The new strategy offered positive steps on supporting green finance but failed to tackle the urgent problem of money flowing to risky fossil fuel projects.
By not acting decisively, this government is allowing finance to continue to make the climate crisis worse and is exposing UK financial stability to growing risks from a delayed disorderly transition toward a net-zero emissions economy.
To make London the first ‘Net Zero Financial Centre’, the government and the Bank of England must act jointly to address risks of fossil finance through higher capital requirements and support essential green investment with a dedicated cheap lending scheme.”
Karen Ellis, Chief Economist at WWF commented,
“The Green Finance Strategy contained important positive signals. It acknowledged the importance of reaching both nature and net zero goals and that real economy incentives and green finance must work hand-in-hand in net zero investment roadmaps.
“However, the strategy needs to be followed with concrete commitments. We need confirmation on how transition plans and nature disclosures will be made mandatory, how financial flows will be independently tracked and how financial regulators will be empowered to proactively support green finance. At this critical time for the planet’s future, government must act decisively and swiftly”.
- Download the full letter: [pdf] and accompanying briefing [pdf]
- The government’s 2023 and 2019 Green Finance Strategy documents can be found here: https://www.gov.uk/government/publications/green-finance-strategy
- 75 leading thinkers wrote to the government last year to set out 5 key priorities for the Green Finance Strategy in July 2022: https://positivemoney.org/2022/07/joint-statement-green-finance-strategy/
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