Future of UK finance: It’s not easy being green

It would appear that Chancellor Rishi Sunak has decided that the future of the UK financial services sector is green.

Yesterday the Chancellor outlined plans for the UK’s first Sovereign Green Bond and for the UK to become the first country to make TCFD-aligned disclosures mandatory as part of his plans to make the UK attractive to financial services firms after Brexit.

Sunak said the money raised by the green bond will only be used to “fund projects to tackle climate change, finance much-needed infrastructure investment, and create green jobs across this country.”

The move came as Bank of England Governor Andrew Bailey warned climate change poses a bigger threat than the Coronavrius pandemic. Bailey said the Bank would be focused on combatting climate change.

Sunak also outlined the UK’s approach to financial services and approached the topic of equivalency, but the strong focus of his statement on green finance seems to indicate this is where the Treasury sees as the biggest opportunity for the UK financial services market in the post-Brexit world.

Green finance is certainly a hot topic in the media.

The Coronavirus pandemic seems to have thrown a spotlight on ESG factors in investing, with a strong media focus on ethical funds. Every month over the past year or so seems to bring a new ethical fund launch and investors certainly have more choice than ever.

Unless we see heavy withdrawals from the sector in the next few months, ethical funds are on course to have their largest ever year in terms of retail funds. Although there is still plenty of room for growth.

Sunak certainly seems confident about the future for the UK financial services sector in the post-Brexit landscape and a green gilt is an ambitious step toward building a more sustainable financial system.

He said: We are starting a new chapter in the history of financial services and renewing the UK’s position as the world’s pre-eminent financial centre. By taking as many equivalence decisions as we can in the absence of clarity from the EU, we’re doing what’s right for the UK and providing firms with certainty and stability.

“Our plans will ensure the UK moves forward as an open, attractive and well-regulated market, and continues to lead the world in pioneering new technologies and shifting finance towards a net zero future.”