Green finance: The City is in a unique position to help business tackle climate change risks
The City has been around since 1189, which is long enough to learn about the importance of long-term value. Nowhere is this truer than sustainability and the environment, where uncertainty, in the shape of climate change and finite natural resources, lurks just around the corner. We must take action if we are to protect business against these risks that fall outside the quarterly reporting cycle.
On Thursday, the City Corporation launched the Green Finance Initiative, which aims to improve the financing options for sustainable infrastructure projects and support the sector’s development. This is a particularly pressing issue because McKinsey, the World Bank and the World Economic Forum all say that the infrastructure investment gap is about $1 trillion a year from now until 2030.
The City’s convening power and close relationships with industry give us a unique ability to bring all the necessary parties together to focus on concrete achievements which will support the industry. We held a business breakfast to learn more about which steps would do most to tackle the problems facing the green industry, and found that what was urgently needed was: greater transparency, to help build confidence in the market; standardised accreditation for products, which will help the public understand them more easily; and more green bonds, especially in infrastructure.
The Green Finance Initiative targets these specific issues, and the first six months will focus entirely on green bonds. At the COP 21 Paris climate summit, which has energised the industry, one of the key findings was that business needs to pull its weight. However, it is hard for individual companies to ascertain prudent investments, or to build green options into an infrastructure project, without a structure in place. Our initiative is designed to support and guide the industry around these issues.
We have a track record of helping markets to grow through these methods – our renminbi (RMB) initiative has led to a growth in trade volumes of 600 per cent since it was launched in 2011, followed by a government-issued RMB bond and the sale of more than $1bn dual currency bonds in London by the Agricultural Bank of China in 2015. The political will was there to make our renminbi vision a reality, and it’s there to make our green vision a reality too.
The turnout at Thursday’s event showed that the City is keen to get involved, and we can already see new norms emerging as more and more firms integrate social and environmental factors into their financial documents, and investors are pressurising businesses to look further than the normal three month reporting cycle. Sustainable finance is no longer “nice to have” or the icing on the cake, it’s the yeast in the dough – absolutely essential for long-term success.
Together with the Treasury and the Department of Energy and Climate Change, we’re going to promote what business can do, how to do it, and what will change because of it. It’s an immensely exciting time – and I believe that we can succeed in making London the centre for green finance.