Thursday, Jan 21, 2021
International Finance
Finance Magazine

The growing allure of green finance

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Green Investment Bank has committed to £3.4 billion of its own capital to 100 projects with a total value of over £12 billion

The international social, political and economic backdrop is increasingly green-centric. The so-called green agenda has been greatly explored in recent years as it seeks to promote and support the flow of financial instruments in the development of sustainable business models and investments. Consumers have become more socially and environmentally conscious with their investments. And thanks to the high-profile endorsements of world-famous personalities such as David Attenborough and Greta Thunberg, people are making choices that can help to tackle the climate crisis now more than ever. This even includes self-evaluation lifestyles or making choices in green finances. Emerging government policies are not only becoming increasingly more supportive of a green agenda, but they increasingly talk to the potential for a green recovery on the back of the coronavirus pandemic, which has changed the world so fundamentally in 2020. 

The coronavirus pandemic is not the only factor that has pushed governments all around the world to make advancements in green agendas and continue their prior efforts in such developments. It was on July 2, 2019, when the UK government published a report known as the Green Finance Strategy, with a subtitle Transforming Finance for a Greener Future to outline how the financial sector can drive progress in relation to climate change and help the UK achieve its net-zero emissions target. 

The UK is an outstanding example of green finance

Many governments including the UK have included green recovery measures in their response packages through grants, loans and tax reliefs. These are aimed at developing green transport, circular economy and clean energy research and development. The UK government has also unveiled the Green Homes Grant, which is a £20 billion scheme allowing homeowners and landlords to access funding to upgrade the energy efficiency of their homes. The country is leading the change to build a sustainable financial future. The government is actively involved in encouraging more green finance in the country and internationally, through various measures—such as green financing, addressing market barriers, building capability and developing innovative approaches to strengthen the financial landscape to tackle climate change.

The City of London Corporation and the government are keen to the country’s capabilities on this front and transform it into a global hub for green finance. Now significant upgrades in technology, policies and business models, in addition to the increasing public awareness in the country’s transition to a green growth pathway. Besides the UK, other countries like China have also recorded significant reductions in carbon intensity last year. 

Flows of private finance into sustainable projects

The country already has a proud record in tackling climate change and transforming its financial landscape is imperative to its vision. Its Green Finance Strategy largely supports the economy policy for sustained growth and the delivery of modern industrial strategy. But it needs to be combined with specific actions to speed up the flows of private finance into key environmental sectors at home and overseas. 

In the last decade, there has been more than £92 billion invested in the country’s clean energy, with specific interventions to speed up the process. For example, the Green Investment Bank has been working along with more than 100 private sector and third-party investment partners. In fact, the bank alone had committed to £3.4 billion of its own capital to 100 projects. These projects were estimated to have a total value of more than £12 billion.

New technologies for financial viability 

In parallel to these attitudes and policy shifts, technological advances continue to accelerate the country’s efforts in green finance. This not only relates to the emergence of new technologies, but it also means scalability and financial viability of recent innovations to make them more accessible to the average consumer. With the rise in the penetration of electric and hybrid vehicles, or the wide scale adoption of smart home technology related to entertainment, social interaction, convenience or security, there is no reason to believe that the green technology trajectory will be any different. 

We ultimately believe that this shift in mindset from awareness and understanding to action coupled with the current macro-conditions mean that a green future is not only desirable but is inevitable. I founded Tandem with an intent of building ‘The Good Bank’ that puts customers’ needs first and takes the stress out of money management.

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