By Katharina Ehrhart, Research Officer at City of London Corporation
On 17 July, the City of London’s Green Finance Initiative is hosting the 2nd Green Finance Summit at the historic Guildhall. This year’s summit is dedicated to “Mainstreaming Green Finance”.
Green finance means the investment in climate-friendly technology and infrastructure which will support the transition to a low-carbon economy. This is a global challenge, estimated to be worth trillions of dollars. In Mark Carney’s (Governor of the Bank of England) words, “Investment on this scale cannot be financed in niche markets. It must be mainstream and global.”
The UK and specifically the City of London is recognised to be a global hub for green finance. Thanks to the quality and depth of its green finance offer, London ranks 1st in Z Yen’s Global Green Finance Index 2018.
In 2015, the London Stock Exchange (LSE) launched a range of dedicated ‘green bond’ segments. There are strict admission criteria for those green bonds, based on the ICMA’s Green Bonds Principles.
Currently there are 78 green bonds listed on the London Stock Exchange. These are popular with investors from across the globe. The LSE issued the world’s 1st certified green bonds and green covered bonds from China, India and the UAE, while Fiji has just launched a sovereign green bond. Since the 2017 Green Finance Summit, the amount raised in green bonds on the London Stock Exchange has doubled from $10.5bn to $24.5bn, demonstrating investors’ commitment to green finance. In the preceding year from 2016 and 2017, green bond issuance grew by 78% worldwide to $155.5 billion (Reuters). Green bonds are generally over-subscribed which means that demand for them outstrips supply and there is a large potential for growth (ClimateBonds.net).
Current challenges in green finance are questions regarding green loans and securitisation, targeted support for green infrastructure as well as give investors greater transparency to measure climate risk. The Task Force on Climate-related Financial Disclosures (TCFD) has developed recommendations for improving investor transparency which already been endorsed on a voluntary basis by 275 companies have a combined market capitalization of over $7.1 trillion (May 2018 data)
The UK Government have already responded to one of the recommendations the Green Finance Task Force made in its March 2018 report. In his Mansion House speech on 21 June, Chancellor of the Exchequer Philip Hammond announced the establishment of a new Green Finance Institute in London, jointly funded by government and the City of London. The objective is that “firms from across the world can access our one-stop-shop for world-leading climate science, and for capital.”
Drawing on the theme of Mainstreaming Green Finance, the 2nd Green Finance Summit will bring together high-level speakers to present on policy and regulatory developments in the sector. Over 900 delegates are expected to attend the summit which is supported by Amundi Asset Management, Carbon Delta and Green Investment Group.