Due to climate change many countries within Europe are looking towards making their finance sectors greener. In 2021, there was a 97% increase in the value of green finance in Europe, according to the report carried out by New Financial. With many countries having launched the use of sovereign green bonds as part of their recovery plans due to the COVID-19 pandemic.
In regards to the UK, it has been recorded that we are around four years behind the rest of Europe when considering the proportion of activity the green finance sector has within the market.
The UK’s former Chancellor, Rishi Sunak, stated at COP26 that the UK are putting plans in place to become the ‘world’s first net-zero financial centre’. In order to achieve this the UK Government has already put together a £16 billion sovereign green bond package ready to be launched, and for companies that are known to produce large emissions, a net zero transition plan mandate will be put into place.
There are fears that UK businesses are greenwashing, and they are understating the climate risks their companies are adding to. Emma Howard Boyd, Chair of the Environment Agency, has called for businesses to stop overexaggerating when it comes to the work they are actually doing to sustainably improve their businesses, especially in the financial sector.
The Bank of England has predicted that if the financial sector doesn’t adapt and put mitigation efforts into place to fight climate change, the sector could be facing a £340 billion loss by 2050.
Howard Boyd also stated that if companies outlined their transition to net zero in a completely transparent way it will help other companies to find the best practices and ideas whilst they transition. This will create a lower impact on companies when climate shocks occur as they will have sustainable policies and developments in place to deal with them efficiently.