The Aldersgate Group published its report called Financing the transition a strategy to deliver carbon targets. It argues that a new strategic approach to reduce investor risks, mobilise capital and streamline institutional structures would accelerate the transition to a low carbon economy and reduce costs.
It also states that a minimum of £250 billion of private sector investment is needed to flow into the low carbon economy by 2020. The adoption of new financial mechanisms, such as green bonds and a dedicated infrastructure bank, would reduce investor uncertainty and costs of capital.
Aldersgate Group chairman Peter Young said: “The Climate Change Committee has called for a step change in Government policy to ensure carbon budgets are met and it is clear that mobilising the required finance is a vital component. Instruments that reduce investor risks and attract private sector capital would accelerate progress and maximise the economic benefits in terms of jobs and wealth creation.”
Finance roundtables chair Emma Howard Boyd added: “There remains a credibility gap between policy and delivery which has resulted in too much uncertainty and risk for investors to finance at the scale that is required. Leadership in financial innovation would help reduce these risks and cement the City of London's position as the global centre for green and sustainable finance.”
The report concludes that the scale and urgency of the low carbon transition presents a major challenge for the UK economy. It states: “The UK is competing in global markets and it is imperative that the wider policy framework not only sets strong budgets and policies to deliver them but also addresses key barriers such as the design incentive structures, planning legislation, supply infrastructure and the skills of the workforce.”
The Aldersgate report argues that the UK needs an active financial strategy that should aim to:
Reduce the risk of investing in low carbon projects;
Mobilise private sector capital flows; and
Reform institutional structures.