Impact Points:
- Transforming the UK into a net-zero financial hub can spur innovation, economic growth, and resilience.
- Strategic climate finance policies will bolster the UK’s leadership in global finance and sustainability.
- Accelerated action on the built environment and market incentives is essential to meeting national climate goals.
Why it matters
Amid the ongoing climate crisis, the UK’s new government faces a historic opportunity. Strategic climate finance policies not only position the country as a leader in the global net-zero transition but also promote long-term economic resilience. The first 100 days of leadership are critical to setting the tone for a more sustainable and prosperous Britain.
What needs to be done
In the recent report Accelerating Transition, leading climate finance experts from King’s Business School lay out a roadmap for transformative policy action in five key areas:
1. Climate Risk Management
Effective climate risk management is vital for safeguarding the UK economy. This includes:
- Enhancing climate stress testing to evaluate physical and transition risks.
- Issuing adaptation bonds to finance resilience projects.
- Requiring firms to disclose projected impairments in a net-zero aligned economy. “Given the impacts that climate change is already having, adaptation and resilience must be central to all policy decisions,” experts advise.
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2. Data and Regulation
Strong data and regulations are the foundation for climate finance. The UK must:
- Ensure firms of all sizes report GHG emissions and climate risk data.
- Equip regulators with better tools, such as higher capital gains taxes on high emitters.
- Foster international cooperation on sustainability standards. Aligning with global regulatory standards will maintain the UK’s competitive edge while promoting transparency and accountability in climate action.
3. International Finance
The UK can reassert its leadership in global finance by boosting climate finance flows and supporting emerging markets. Key steps include:
- Expanding green export credit schemes and innovation grants for British entrepreneurs.
- Promoting green and sustainable listings in London, enhancing its role as a global financial hub.
- Issuing sustainability-linked sovereign bonds to demonstrate leadership in debt markets.
4. Market Incentives
Markets need proper incentives to facilitate the transition to net-zero. The government should:
- Adjust carbon pricing to align with the EU’s Carbon Border Adjustment Mechanism, ensuring smooth trade.
- Use public finance to attract private investment in green technologies, such as electric vehicles and heat pumps. The right signals will mobilize private capital to scale climate solutions and accelerate decarbonization efforts.
5. Built Environment
The UK’s outdated housing stock is a major source of emissions. Urgent actions include:
- Launching an ambitious retrofit program to upgrade millions of homes, creating jobs and reducing energy costs.
- Implementing energy efficiency standards for both new and existing buildings.
- Investing in green infrastructure and accelerating planning for major projects like electricity grid upgrades. “The UK must prioritize decarbonization in construction to achieve national climate targets,” the report states.
The bottom line
The UK’s new government has a unique window to implement policies that will set the course for global leadership in climate finance. By focusing on climate risk management, regulation, international finance, market incentives, and the built environment, the UK can achieve its net-zero targets while creating a resilient and equitable economy.
