Green Finance

Lord Bates Excerpts

Monday 5th March 2018 Lords Chamber

[Lord Teverson]

To ask Her Majesty’s Government what plans they have to issue a sovereign green bond to support the United Kingdom’s position in the global green finance market.

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, the Government support development of the corporate green bond market. The Green Finance Taskforce is considering recommendations in this field. The Economic Secretary and the Minister for Energy and Clean Growth met the task force on 26 February to discuss emerging recommendations.

[Lord Teverson (LD)]

My Lords, I understand the point about corporate green bonds, but a year ago France issued a €7 billion green sovereign bond, and Poland did so before that. We are starting to lose our position in this market, not just in Europe but globally. Surely at this time it is really important that the City leads in this area. This would be simple and getting on with it now would involve no extra cost. Will we do so?

[Lord Bates]

We have said that we are open to that. It is one option being looked at by the Green Finance Taskforce, and it feeds into the work of the Green Finance Initiative in the City of London, which is doing great work in this area. However, we should not overstate the extent to which we are being left behind. We are in a position where some 63 green bonds in seven currencies listed on the London Stock Exchange, amounting to £20 billion—that figure represents an increase of 93% between 2016 and 2017. However, we will keep all options open and listen to the advice that we are given.

[Lord Flight (Con)]

My Lords, will the Government consider allowing local authorities to raise funds by bond issues, particularly in areas of environment expenditure?

[Lord Bates]

Many of those areas are for the local authorities concerned to look at. One thing that we have introduced is the clean air fund, which was announced by the Chancellor, and some £220 million will be available specifically to help local authorities in that area, but of course local authorities are able to come forward with their own proposals, should they choose to do so.

[Lord Davies of Oldham (Lab)]

My Lords, the House will be concerned that the Minister’s main reply was that we are looking at this issue. France, Belgium and Poland have already acted, and certainly the next Labour Government will act promptly on the question of a green fund for the necessary control of climate change. Why are the Government always thinking about and considering things and looking at proposals when others act?

[Lord Bates]

We are thinking about it because there is quite a lot to think about. The issue is, first of all, whether the Government should be launching these bonds while the market itself is growing quite dramatically. Five years ago, there were virtually no green bonds, or a very limited amount, but now their issuance is $160 billion globally, with some $200 billion predicted for this year. That is happening. Secondly, the Debt Management Office would have to look at whether there is a sustainable demand for hypothecated bonds, in this case. It is not something that we have tended to issue, nor have previous Governments—we tend to operate through gilts. Therefore, it is right that we listen to the expert advice that we receive and then act upon it.

[Baroness Kramer (LD)]

My Lords, I encourage the Government to take on board the warnings that Paris and others are surging ahead in this market because of their willingness to establish that base through green sovereign bonds. I suggest to the Minister that ordinary people would like the opportunity to invest in green and sustainable investments. Will the Minister turn to the NS&I and ask it to make available for ordinary people a scheme that would let them invest in some sort of green investment or savings scheme?

[Lord Bates]

The last point in particular is very interesting and it is certainly worth the NS&I looking at it. Again, that comes within the remit of the Green Finance Taskforce. It was asked to look at intuitional barriers to green finance but also at retail. All that is very much in its remit, and we would encourage it to look at those issues.

[Lord Mountevans (CB)]

My Lords, given my understanding that there is no cost premium for a sovereign green bond, and given the very positive signal that issuance from the UK Government would carry, will the Minister acknowledge the benefits that this would have for pump-priming the market, as with the sovereign sukuk, for encouraging other public sector issuance—for example, municipal green bonds—and for boosting the creation of green finance skills in financial institutions?

[Lord Bates]

A lot is being done to pump-prime the market at the present time. Some of the issuances that have already taken place or been announced, such as that from Barclay’s and the Thames tideway tunnel, have been part of the stimulation and growth packages that we referred to. That is why we have the task force, why we are very pleased to be partnering with the City in the Green Finance Initiative and why we should take its advice and act upon it.