Britain is leading the charge to go green
As the world’s most global marketplace, the City’s strengths will come to the fore outside the EU
The UK is playing a leading role in financing the “green” economy. Yesterday at London Stock Exchange, we celebrated the record issuance of nearly half a billion pounds of green bonds by Thames Tideway to tackle water pollution in the UK. Today, Claire Perry, energy and clean growth minister, joins us to celebrate the work of the UK Green Finance Taskforce and to mark the final report of the EU High-level Expert Group on Sustainable Finance, which recommends how green finance can reshape capital markets, including filling the green funding gap of €170 billion in the EU alone.
Last week, I joined the Prime Minister’s business delegation to China. We visited Wuhan and saw plans to turn one of China’s top 10 cities green. With trillions of dollars needed to finance sustainable infrastructure, China recognises the vital role of international capital markets and has a close partnership with the UK in green finance.
For this is a global challenge, and the UK and City of London have a central part to play in rising to it. For more than 300 years the UK has been the world’s most global marketplace, financing economic shifts and supporting the most efficient access to capital for governments and companies. Natural strengths such as our deep, liquid and multi-currency capital markets combined with our commitment to international standards, rule of law, English language and central time zone are crucial, as is our innovative financial ecosystem, talent pool and adaptability to new technology. These strengths come to the fore as the UK leaves the EU.
As a UN Sustainable Stock Exchange, we use all our platforms to support positive change. In 2015 we were the first major exchange globally to launch a dedicated green bond market. Since then, we have become home to the first independently certified international green bonds from China, India and the Middle East, including the first ever green dim sum (Chinese renminbi) and green masala (Indian rupee) bonds. Last year – 2017 – was a stellar year, with green bond issuance rising by 93 per cent and the past three months seeing more green bonds issued than ever before. A total of $800 million in green bonds denominated in Indian rupees was raised to develop renewable energy and make India’s railways greener.
From bonds financing clean energy and sustainable schools in Scandinavia and reforestation in Africa, to instruments financing mortgages from Barclays Bank for the lowest carbon UK properties and Toyota raising €600 million to develop electric vehicles, the London market is partnering to drive global innovation.
Green bonds are just one part of the story. Equity capital raised for green and sustainable operations rose nearly 200 per cent in London last year. Renewable energy firms from Ireland to the US tapped our market to reach global investors. We have pioneered renewable energy investment funds and cleantech exchange traded funds, allowing investors to incorporate sustainability into their decisions.
As well as raising capital, we ensure global investors have the data and analytics required to make informed decisions. FTSE Russell, the index provider, now tracks how companies generate green revenues – a critical component missing from previous investment models. When Legal and General launched the Future World Fund, tracking one of FTSE Russell’s smart sustainability indexes, HSBC UK announced that it would make this the default fund for its defined contribution pension scheme. Three UK companies together delivering unprecedented change. The Government Pension Fund of Japan has followed suit. Last month the world’s largest asset manager, Blackrock, also called on companies to serve a social purpose. This year the UK Green Finance Taskforce, of which the London Stock Exchange Group is a member, will set out how the UK will further drive this global change.
Amid much debate about trade and access to each others’ markets, what we see in green finance is that it is global markets and infrastructure that will channel this extra investment efficiently, reduce the cost of capital and manage risk for British, European and global companies.