ESG: UK government publishes its updated Green Financial Strategy

The global transition to a net zero economy will see trillions of pounds reallocated and invested in new projects, products and services.

On 30 March 2023, HM Government (HMG) published its 2023 Green Finance Strategy (the Strategy). The Strategy updates the 2019 Green Finance Strategy and supports the work undertaken by HMG in its previous Roadmap to Sustainable Investing (October 2021) and Call for evidence (May 2022).

We will be publishing a client note on the Strategy in due course but by way of a high level outline:

The Strategy sets out:

• how continued UK leadership on green finance will cement the UK's place in this growing global market and
• how HMG will mobilise the investment needed to meet the UK's climate and nature objectives.

What are HMG's objectives?

The Strategy seeks to reinforce the UK's position as a world leader on green finance and investment by delivering on the following five key objectives:

• UK financial services growth and competitiveness

The UK will do more to support the financial services sector prosper from a transitioning global economy and the UK's financial services sector will be behind every step of the transition

• Investing in the green economy

Private investment will be crucial to delivering net zero - HMG estimates that an additional £50-60 billion capital investment p.a. will be needed to deliver on the UK's net zero ambitions, through the late 2020s and 2030s

• Financial stability

An effective green finance framework helps ensure the finance sector has the information it needs to manage the profound risks to the economy that climate change and environmental degradation pose

• Incorporating nature and adaptation

'Significant progress' has been made recently on nature finance not least with the Kunming-Montreal Global Biodiversity Framework agreed at COP15 in December 2022. The Strategy will explicitly incorporate both nature and climate adaptation into HMG's green finance policy framework.

• Aligning global financial flows with climate and nature objectives

The UK is strategically placed to collaborate with international partners to support the alignment of global financial frameworks and stimulate investment towards emerging and developing markets where capital needs are highest.

What happens next?

The next twelve months are going to be busy - the Strategy sets out HMG's commitment to have taken steps in a considerable number of areas before the year is out.

Just a selection of these include HMG's plans:

'In 2023' to

• publish a series of net zero investment roadmaps and nature investment roadmap
• consult on specific steps and interventions needed to mobilise additional finance through high-integrity voluntary markets and protect against the risk of greenwashing
• consult on the UK Green Taxonomy

'In Q2 2023' to

• bring amended regulations to implement pensions reforms - by as early as April 2023

'In Q3 2023' to

• launch a formal assessment mechanism once the first two IFRS Sustainability Disclosure Standards are published (expected June 2023)
• set out further detail on the SDR implementation timeline
• launch a call for evidence on Scope 3 greenhouse gas emissions reporting.
• provide further information for trustees on their fiduciary duty in the context of the net zero transition by reviewing Stewardship Guidance
• consult on introducing requirements for the UK's largest companies to disclose their transition plan if they have them
• explore how best the final TNFD framework should be incorporated into UK policy and legislative architecture