The Chancellor of the Exchequer Rishi Sunak has unveiled plans to make £15bn available to investors to support the net-zero economy through a sovereign green bond this year. Sunak’s spring budget has met with widespread approval across technical and environmental industry sectors.
Expected to launch in summer 2021 the green gilt (or bond) is designed "to help finance critical projects to tackle climate change and other environmental challenges, fund important infrastructure investment, and create green jobs across the UK" – and brings the country in line with similar initiatives elsewhere (EA 22-Feb-21).
The government has also announced a green retail savings product, also available from summer, which will be closely linked to the green bond framework and will give UK savers the opportunity to contribute to the effort to tackle climate change.
CEO of the Green Finance Institute Rhian-Mari Thomas said: "This green gilt is essential in maintaining the UK’s position as a global leader in green and sustainable finance. The finance community has been keen to see the UK Government take this step, as there is growing demand for investments that will secure a zero-carbon future. This Green Gilt will not only be able to provide finance for green infrastructure, it will create green jobs and catalyse the sterling green bond market. It is a very welcome development as we countdown to COP26 that will bolster the green recovery."
Peter Brooke, regional strategic sales and marketing director (Europe & Africa) at global geo-data specialist Fugro said: "As the UK continues its transition to renewable energies, the development of cutting-edge technology supporting the green agenda is vital for achieving the government’s 2050 net zero emission target. "While a lot must still be done to reduce human impact on the planet, this announcement is a big step in the right direction."
A framework for the green gilt system will be published in June and will detail the types of expenditures and projects that will qualify for finance alongside future reporting arrangements.
Despite the enthusiasm for the green bond initiative, many are saying it needs to go further. Media reports cite unfavourable comparisons of the existing allocations with the estimated £1tn cost of decarbonising the UK, including £450bn alone for the country’s heating infrastructure.