Green Finance

Lord Mountevans Excerpts

Thursday 18th January 2018 Lords Chamber

[Lord Mountevans (CB)]

My Lords, I add my thanks to the noble Lord, Lord Teverson, for his insight during this debate, and for providing an opportunity to address this important issue. My City interests are recorded on the register.

I approach this debate not with the intention of giving an environmental sermon, but as a businessman, having had the privilege of launching the Green Finance Initiative at the City of London Corporation back in 2016, alongside Sir Roger Gifford, one of my predecessors as lord mayor and now chairman of the initiative, the so-called GFI. Tackling climate change is one of the defining challenges of our time, but it also represents a material and financial risk to us all. Left untackled, the cost of climate change will permeate throughout the financial services sector—via pension funds, share prices, premiums and loans—not to mention the impact on GDP and the wider economy. We therefore face an economic and prudential as well as an environmental imperative to act now.

At its core, the appeal of green finance is that it invites businesses, savers and investors to contribute to tackling pollution and climate change while safeguarding long-term profitability. In short, it is what I like to think of as business playing its part in addressing climate change. Over the last decade, green finance has risen to the top of political, regulatory and industry agendas worldwide. This was demonstrated at the G20 summit in Hangzhou in 2016, where world leaders made an historic commitment to “scale up” green finance after President Xi adopted it as a key issue for the first time.

It is well known that Paris has long identified the value of green finance, and has been driven in particular by a moral vigour since the 2015 UN Climate Change Conference at which the Paris Agreement was negotiated and adopted. Indeed, as noted, France became the first country to issue a sovereign green bond in 2017, underlining its desire to be seen as a driving force for the implementation of the goals of the agreement.

However, London’s appeal lies in the fact that it can offer more than worthy intentions; the UK can provide commercial expertise and a global business hub with which to grow this new and innovative product. One of the City’s great strengths is its ability to capture fresh trends and evolve, as demonstrated by the growth of Islamic finance in London in recent years, for example.

Since 2008, the UK has led international efforts in green finance, launching the first offshore green rupee and renminbi bonds in 2015 and 2016 respectively. I had thought that there were now 59 bonds but I was delighted to hear from the noble Baroness, Lady Kramer, that there may be 64 bonds listed in London in seven different currencies—a sign of how rapidly the global appetite for green products is growing and of how quickly the market is expanding.

However, your Lordships will recognise that green finance still occupies a niche position in relation to the UK’s wider financial services offering. I look forward to seeing the results of Sir Roger’s labours at the GFI, and the results from the Government’s newly launched green finance task force, which will publish its recommendations in the spring to accelerate the growth of green finance in the UK.

May I take a moment to be so bold as to make just two suggestions that I hope the Minister will take the time to reflect on? First, I would join with the previously made request for the Government to consider implementing the recommendations from the Financial Stability Board’s Taskforce on Climate-related Financial Disclosures, particularly in relation to greater corporate disclosure. Indeed, through its work with the green finance task force, the GFI can act as a hub for exchanges between public and private sector to explore policy proposals for implementation, including existing UK codes, regulation and laws.

Secondly, I urge the Minister to forget all that he learned in history lessons and consider following French footsteps. I refer to the flotation by France of a sovereign green bond previously mentioned. It would certainly be a significant, symbolic and practical step for the UK to issue its own sovereign green bond and I know that the financial services industry would welcome this most warmly. Interestingly, Paris has issued a green bond—an idea not yet contemplated by London. But it is encouraging nevertheless to note that Transport for London in fact issued its own first green bond back in 2015. This may be a good moment to note that, in my understanding, there is no premium for green finance, so it is competitive.

Also central to the sector’s success here is the Government’s ability to promote the UK as a key destination for green inward investment, and the development of financial relations and solutions abroad through our green financial expertise. Given the considerable time spent in this place discussing our existing trade relations, green finance presents an opportunity to consider new relationships with trading partners around the world and a chance to exert Britain’s soft power.

The Green Finance Initiative has established formal partnerships with its Chinese counterpart, the Green Finance Committee. As confirmed by the recent Economic and Financial Dialogue, it is an extensive partnership focusing on the global development of green finance. Importantly, in 2018, the GFI expects to conduct detailed work in a number of areas including green standards for strategic investment in belt and road infrastructure. Your Lordships might also be interested to know that, in 2017, the GFI also signed a formal partnership with its Brazilian counterpart, the Council for Sustainable Market Development, focusing on public sector leadership, standards and certification, and data.

Ultimately, the success of green finance lies in collaboration. International leadership and partnerships will be key to driving capital flows through London after the UK leaves the EU. It is essential that London, as a financial centre, remains flexible in adapting to the needs of investors and customers in order to continue as a global leader in green finance. To this end, the City of London has already focused attention via government, business, banks and institutional investors on ways in which to grow the sector, while promoting best practice. Combined with the Government’s commitment to a new industrial strategy, which your Lordships debated in this place only last week, and the Clean Growth Strategy, the UK is in a strong position to capitalise on progress already made.