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Mobilising green investment: Green Finance Strategy

Author: ICAEW Insights

Published: 04 Apr 2023

The UK government has updated the Green Finance Strategy to rally private investment for a net-zero, nature-positive nation.

The UK government has released an updated Green Finance Strategy, ‘Mobilising Green Investment’, with the aim of unlocking the billions of private investment required to achieve net zero and nature recovery.

The strategy highlights the importance of nature in green finance, broadening the scope beyond net zero. “Following the landmark Kunming-Montreal Global Biodiversity Framework agreed at the UN Convention on Biological Diversity COP 15 in December 2022, it is encouraging to see the government taking explicit action to incorporate nature and climate adaptation into the green finance strategy,” says Sarah Reay, Climate Change Manager at ICAEW. 

In 2022, net-zero investment roadmaps for specific sectors (automotive, hydrogen, Jet Zero, and carbon capture, utilisation and storage) were published. Throughout 2023, the government has committed to releasing more sectoral roadmaps, alongside relevant government policy and funding, to make the sector more attractive to investment. It has also committed to publishing a nature-positive roadmap for key sectors by 2024.

ICAEW joined 30 other organisations in a joint letter to Chancellor Jeremy Hunt in October last year, calling for a net-zero investment plan to leverage private investment. This echoes the sentiment of the roadmaps, says Reay, “but they do not provide a full economy-wide plan for net zero, as stipulated in the letter”.

Green transition an opportunity for growth

The government has highlighted the potential growth opportunity for the UK when it comes to transitioning into greener operations. According to the strategy, supplying the goods and services necessary to reach global net-zero ambitions is estimated to be worth up to £1trn to UK businesses by 2030.

Furthermore, exports within low-carbon and renewable energy industries are growing significantly faster than exports from the broader economy. Between 2020 and 2021, exports from these sectors increased by an estimated 67%, compared with total exports, which increased by 6%.

However, transition finance to support the decarbonisation of high-emitting companies is an increasing concern, although the government has said it will undertake an industry-led market review of the area.

Sufficient reporting needed to keep on track

In addition to raising finance, developments in sustainability reporting remain in the spotlight. The strategy reiterated the UK’s continued support of the International Sustainability Standards Board (ISSB) standards and the intention to establish two advisory committees to lay the groundwork for UK ISSB adoption. Whether or not the government endorses the standards will be decided within 12 months of the final standards being published (currently due in June 2023). 

Transition planning and adaptation are frequently mentioned in the strategy, with the government once again promoting the work of the Transition Plan Taskforce (TPT). As well as encouraging the work of the TPT, the government aims to expand the scope of companies required to disclose transition plans and will consult towards the end of 2023 on introducing requirements for large companies to disclose transition plans, aligning with FCA rules for listed companies. 

An adaptation action plan and finance deliverables will be launched in 2024. To aid with labelling and reporting, the UK Green Taxonomy is due to be published for consultation this autumn. In terms of adaptation, ICAEW welcomes the government’s plans to work with industry partners on climate resilience assessment and disclosure by developing adaptation metrics and guidance, says Reay.

However, she says, “despite some of the positive signals presented in the strategy, much of its content reinstates commitments that have previously been made around policy measures and public funding programmes. In addition, a whole host of consultations are expected to arise throughout 2023 and 2024, meaning more conversations and little direct action. 

“Early commentary suggests that the updated policy measures in the strategy and the 40 other sustainability related documents that were published alongside this are still insufficient to achieve net-zero emissions by 2050.” 

Action on nature is behind that of climate, but the work of the Taskforce on Nature-related Financial Disclosures (TNFD) is expected to publish the finalised version of its framework in September 2023. The government says it is exploring how to incorporate the framework into UK policy and legislation, in line with Target 15 of the Global Biodiversity Framework. The TNFD is a key method of operationalising Target 15, it says, and it is aiming for closer integration with the ISSB to ensure interoperability and a solid global baseline for sustainability reporting. 

In addition, says Reay, “As noted in the strategy, the Green Finance Education Charter, of which ICAEW is a signatory, has relaunched as the Sustainable Finance Education Charter (SFEC) to reflect the need for professionals to address wider issues of biodiversity loss and ensuring both an economically and socially inclusive transition to net zero.” 

She concludes: “ICAEW has an important role to play in upskilling finance professionals – indeed all members working across the economy – to deepen their understanding of sustainability issues, thereby accelerating financial flows to aid the transition to a net-zero, nature-positive nation.”

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