Exploring the potential impacts of both public and private financial strategies in carbon emission reduction across the global economic landscape.
The Green Finance Institute is working closely with the market to test and develop property-linked finance, such as the Property Assessed Clean Energy Scheme, within the UK. This move is part of a broader effort to transition the economy towards a greener future.
Last year's COP26 climate conference saw key developments, including pledges to halt financing for fossil fuel developments overseas and to divert $8 billion annually to green energy from 2022. The Glasgow Financial Alliance for Net Zero (GFANZ) was also established, committing to using science-based guidelines to align assets with net zero by 2050.
However, the global energy crisis has resulted in some planned green investments being diverted back to or staying with fossil fuels. To address this challenge, the UK has set up the Green Finance Education Charter to tackle the issue of education around green technology.
The transition to net zero is a critical factor in the success of climate change policy implementation. Emma Harvey, programme director of the Green Finance Institute, recently discussed how retail banking can support the decarbonisation of the built environment, which is responsible for 23% of UK emissions.
Barriers to widespread adoption of green finance in the UK and EU include lack of standardized metrics and transparency, insufficient regulatory frameworks, inadequate bankable investment projects, and legal protections for fossil fuel assets that discourage divestment from high-carbon activities.
To address these barriers, both the UK and EU are advancing several strategies. Harmonization and standardization efforts, such as the FAST-Infra Label, are being promoted to create clear, credible frameworks and metrics that build investor trust and simplify due diligence for sustainable infrastructure projects. Enhanced greenhouse gas (GHG) emissions reporting and disclosure requirements are encouraging transparency and comparability of ESG data.
Coordinated action across fiscal, regulatory, and institutional levels is emphasized to overcome fragmented approaches—bridging the investment gap requires comprehensive partnerships involving public development banks and private investors to originate and aggregate deals that have bankable structures and social co-benefits. Investment treaty reform is also advocated to remove protections for fossil fuel assets, aligning legal frameworks with climate goals and removing "perverse incentives" that maintain fossil fuel financing.
The EU Innovation Fund provides €1.1 billion to fund breakthrough technologies to help decarbonise energy intensive industries. The UK aims to be the world's first ever net-zero aligned financial centre, with all investment portfolios to be aligned with the transition by 2050. Green mortgages, which provide financial support for improvements in energy efficiency for an existing home or finance for those looking to buy an already highly energy efficient property, are gaining traction in the UK.
COP27, currently under way, is focusing on the continued increase in climate investment and the mobilisation of climate finance in the form of equitable distribution of funds to developing countries. Developed nations who have not yet met their target to provide $100 billion to developing countries will be held accountable at COP27.
Green finance consists of two primary angles: "greening finance" and "financing green". Greening finance provides information to market participants to make financial decisions that align with net zero targets. Financing green involves direct investment, private and public, into decarbonisation projects.
Infrastructure banks have funded investments into subsidy-free solar and battery storage. Mark Carney (Co-Chair of GFANZ) stated that the major finance deliverables set out during COP26 are being met, and that GFANZ is leading the way in this respect. There will be efforts to standardise the definition and understanding of climate finance at COP27.
As the world moves towards a greener future, it is essential to overcome the barriers to widespread adoption of green finance. By implementing harmonization and standardization efforts, enhancing transparency, and coordinating action across various levels, we can ensure that financial flows align with sustainable and socially equitable transition objectives.
- Emma Harvey, discussing retail banking's role in decarbonizing the built environment, highlighted the importance of aligning assets with net zero by 2050, as committed by the Glasgow Financial Alliance for Net Zero (GFANZ).
- In an effort to overcome barriers in the adoption of green finance, the EU is promoting harmonization and standardization efforts like the FAST-Infra Label, aiming to simplify due diligence for sustainable infrastructure projects.
- As COP27 focuses on increasing climate investment and equitable distribution of funds to developing countries, the UK aims to be the world's first ever net-zero aligned financial center, with all investment portfolios aligned with the transition to net zero by 2050.
