2021: the UK’s year to shine as a global climate leader

As Joe Biden begins to shape his pres­i­den­tial tran­si­tion in the Unit­ed States, it is clear action on cli­mate change is a cam­paign pri­or­i­ty that will dri­ve for­ward his new admin­is­tra­tion. A net-zero com­mit­ment from Amer­i­ca would bring 63 per cent of the world’s emis­sions under such a pledge, fol­low­ing bold announce­ments from the Euro­pean Union, Japan, South Korea and, impor­tant­ly, Chi­na, that have all joined the UK’s pledge this year.

Such com­mit­ments sig­nal increas­ing momen­tum towards a sus­tain­able future. The UK, as host of Unit­ed Nations COP26 cli­mate change con­fer­ence and pres­i­dent of the G7 next year, must demon­strate bold lead­er­ship, par­tic­u­lar­ly in one of the UK’s most impor­tant indus­tries: finan­cial ser­vices.

In a pol­i­cy vic­to­ry for the UK Sus­tain­able Invest­ment and Finance Asso­ci­a­tion (UKSIF), chan­cel­lor Rishi Sunak has announced world-lead­ing UK reg­u­la­tions requir­ing cli­mate risk report­ing across the econ­o­my. Investors will soon have access to a large vol­ume of data on the impacts dif­fer­ent cli­mate change sce­nar­ios could have on their invest­ments. How­ev­er, more work is need­ed and the UK must remain close­ly aligned with oth­er major reg­u­la­to­ry devel­op­ments, par­tic­u­lar­ly from the EU.

How government can support green finance

Under­stand­ing risks alone will not be suf­fi­cient to pre­vent cat­a­stroph­ic cli­mate change. For this we need focused and exten­sive sec­tor-by-sec­tor decar­bon­i­sa­tion plans and to under­stand the government’s cli­mate pri­or­i­ties and direc­tion of trav­el. To this end, the government’s plan for a Green Indus­tri­al Rev­o­lu­tion is a great step for­ward.

To help ensure finance flows into areas of the econ­o­my that will con­tribute most to the UK’s net-zero plans, the gov­ern­ment needs to con­tin­ue send­ing strong mar­ket sig­nals and back these up with new fund­ing, leg­is­la­tion and, if nec­es­sary, reg­u­la­tion devel­oped in part­ner­ship with the finance indus­try. Investors are ready to fol­low the call of busi­ness sec­re­tary Alok Shar­ma to align with the Paris Agree­ment and finance the tran­si­tion, but achiev­ing net zero can­not be the respon­si­bil­i­ty of the mar­ket alone.

With grow­ing hopes for a viable coro­n­avirus vac­cine, 2021 should mark the year we focus on build­ing back bet­ter. Our aim must be to restore our econ­o­my and our com­mu­ni­ties in such a way that active­ly dri­ves us towards the low-car­bon future we need to see and to which the gov­ern­ment and sus­tain­able finance com­mu­ni­ty have com­mit­ted. Fol­low­ing our depar­ture from the EU, the UK should cre­ate a nation­al green devel­op­ment bank with a net-zero man­date to sup­port the COVID-19 recov­ery and dri­ve the UK’s green infra­struc­ture rev­o­lu­tion.

Forging a bold vision for 2021

The COVID recov­ery, much like the tran­si­tion to a net-zero econ­o­my, must place peo­ple at its heart. These efforts must pri­ori­tise the devel­op­ment of the future we want, simul­ta­ne­ous­ly max­imis­ing the ben­e­fits of this tran­si­tion for jobs, liveli­hoods and the econ­o­my.

With the eyes of the world on the UK in 2021, the gov­ern­ment has a unique oppor­tu­ni­ty to shape the future of sus­tain­able finance across the globe, achiev­ing our shared ambi­tion for the UK to become the glob­al leader in green finance. Set­ting a bold direc­tion of trav­el, devel­op­ing a flex­i­ble, inno­va­tion-friend­ly and inter­na­tion­al­ly aligned reg­u­la­to­ry envi­ron­ment, engag­ing close­ly with the indus­try and ensur­ing action fol­lows plans, will dri­ve this ambi­tion and ensure cap­i­tal flows to the indus­tries most essen­tial for a low-car­bon future.

UKSIF was found­ed to bring togeth­er insti­tu­tions across the finance indus­try to build a fair, inclu­sive and sus­tain­able finance sys­tem that works for the ben­e­fit of soci­ety and the envi­ron­ment. Next year, as we cel­e­brate our 30th anniver­sary with a grow­ing mem­ber­ship, we are pub­lish­ing a bold future vision plac­ing sus­tain­able finance and invest­ment at the heart of the UK’s efforts to lead the world in a just tran­si­tion to a clean econ­o­my. The tran­si­tion task is sub­stan­tial, but we have the imper­a­tive to suc­ceed and our mem­bers are ready for the chal­lenge.