Green Finance UK
The Green Savings Bonds issued by National Savings and Investments (NS&I) have been newsworthy recently because the interest offered to purchasers reached its highest ever level at 4.2% fixed for three years. Collier (2023) explains that the funds raised from UK savers will be used to help the Government hit its net-zero carbon emissions target by 2050.
Writing in This is Money, Magnus (2023) provides
some background to current interest in the bonds. “Since the first issue of the
green bonds was launched in October 2021 paying just 0.65 per cent, only
£300million of a £15billion target has been achieved.” In view of the low
initial interest rates the reluctance to invest was perhaps unsurprising. The
latest rate rise makes the bonds competitive with a number of other options,
and they are seen as a secure investment.
According to
NS&I (2023), “All money invested in NS&I is passed onto HM Treasury and
contributes towards government spending. Money invested in Green Savings Bonds
will also go to HM Treasury and be held in a general account. HM Treasury then
plans to allocate an amount equivalent to the proceeds raised from Green
Savings Bonds, to its chosen green projects, within two years” and the Government
will later publish details about how the money is being spent.
The uses initially
intended are described by Howard (2021) under the headings of Clean
Transportation, Renewable Energy, Energy Efficiency, Pollution Prevention and
Control, Living and Natural Resources, and Climate Change Adaptation. A number
of areas are excluded: nuclear energy (which will however be funded
separately), vehicles powered by fossil fuels or ethanol; fossil fuel
exploration and exploitation; large hydroelectricity power schemes (schemes
that risk damaging ecosystems); and weapons, tobacco, gaming, palm oil, or
alcoholic beverage manufacture.
The
evaluation and analysis of potential projects and initiatives for funding will
be led by the UK Treasury in consultation with other government departments. Howard
points out that the UK Government has already committed funding to many projects
via traditional means, and suggests that revenue from Green Savings Bonds might
simply replace existing funding. He also refers to the difficultly of “defining
what is and what is not green” but regards spreading investment across a range
of schemes as potentially making a greater contribution to a zero carbon future
than investment in individual projects. It could of course be difficult ever to
know whether this is true, and potential investors will have their individual
attitudes to risk and to the rewards of involvement with specific projects
whose development can be followed.
In July 2022
The High Court determined that the UK’s Net Zero Strategy was "unlawful"
and "inadequate" with regard to meeting its 2050 net zero ambitions,
and ordered that the Strategy be refined and reissued by the end of March 2023
(White and Case, 2022). The government’s recent response was reported by Valero
de Urquia (2030). She describes a “new, more detailed plan for investing in
affordable, clean, homegrown power” which downplays the “green” aspect of the
strategy, focussing instead on energy security. Prime Minister Rishi Sunak
emphasised the need to “drive down energy prices and grow our economy” and the
importance of nuclear power, carbon capture, job creation and maintaining the
UK’s “world-leading action to reach net zero”. Government plans also
highlighted offshore port infrastructure projects for wind energy, hydrogen
projects, small modular nuclear reactor technologies and investment in EV
charging infrastructure and heat pumps. The plans were criticised by Professor
Nick Eyre, of the University of Oxford, for ignoring “the most effective and
lowest-cost measures”: investment in renewable energy and energy demand
reduction. Criticism also came from the Climate Change Committee, which claimed
that there is a “striking lack” of climate preparation efforts from the UK government
in view of ever-more extreme temperatures.
Despite the
perceived limitations of UK government policy and planning, individuals may be
correct in believing that their investment in Green Savings Bonds will have a
positive impact on progress toward a net zero economy. Funding is also needed
from other sources, and the green gilts launched in 2021 provided one method
(DMO, 2023). Green gilt issuance of £10 billion was
planned for 2022-23.
A framework for
the future is set out in “Mobilising Green investment” (gov.uk 2023). The strategy
presented aims to deliver five key objectives: to support the UK’s financial
services sector so that it can prosper from a transitioning global economy; to
raise an additional £50-60 billion capital investment each year through the
late 2020s and 2030s, with private investment seen as crucial; to maintain financial
stability and ensure that the finance sector has the information it needs to
manage risks from climate change and nature loss; to explicitly incorporate
both nature and climate adaptation into the government’s green finance policy
framework; and to capture a huge economic opportunity for the UK by supporting
the global transition.
In order to
mobilise funding it is perhaps necessary to present the threat of disastrous
climate change as “a huge economic opportunity for the UK”, however regrettable
that perspective may seem.
At the end
of March the UK Centre for Greening Finance and Investment announced the
development of a new Transition Finance Centre of Excellence with the
University of Oxford and funding from Banco Santander (CGFI, 2023). It aims to
“play a leading role in defining aspects of transition finance such as best
practice sectoral transition plans and developing new capabilities for
practitioners.” Areas of interest include efforts to “develop the gold standard
for private sector climate transition plans”, building on international disclosure
standards; financing decarbonisation in UK agriculture; providing of
sector-specific insight into the quality of greenhouse gas (GHG) emission data
for financial institutions; and climate scenarios framework analysis to support
the efforts of financial institutions to manage climate-related financial
risks.
References
CGFI, 2023,
“UK Green Finance Strategy 2023 – CGFI announces development of new Transition
Finance Centre of Excellence”, CGFI, March 2023, online, accessed 1 April 2023
https://www.cgfi.ac.uk/2023/03/gfs2023-cgfi-transition-finance/
Collier, C.,
2023, “NS&I Green Savings Bond”, Money Saving Expert, 27 March 2023,
online, accessed 31 March 2023
https://www.moneysavingexpert.com/savings/green-savings-bond/
DMO, 2023, Green
Gilts, UK Debt Management Office, online, accessed 1 April 2023
https://www.dmo.gov.uk/responsibilities/green-gilts/
gov.uk, 2023,
“Mobilising Green Investment,
2023 Green Finance Strategy”, HM Government, March 2023, online, accessed 1 April
2023
Howard, R., 2021,
“Green Savings Bond: What Is It and Where Does the Money Go?” Green Finance Guide, online, accessed 31
March 2023
https://www.greenfinanceguide.com/blog/green-savings-bond-what-is-it-and-where-does-the-money-go
Magnus, E., 2023,
“NS&I hikes interest on Green Savings Bonds to 4.2%: Will it encourage you
to put your cash towards eco-buses and offshore wind?” This is Money, February
2023, online, accessed 31 March 2023
NS&I,
2023, “Green Savings Bonds”, online, accessed 31 March 2023
https://www.nsandi.com/products/green-savings-bonds
Valero de
Urquia, B., 2030, “UK unveils multi-million-pound green energy scheme”, E&T,
March 30, 2023, online, accessed 31 March 2023
https://eandt.theiet.org/content/articles/2023/03/uk-unveils-multi-million-green-energy-scheme/
White and
Case, 2022, “Landmark High Court decision that the UK's Net Zero Strategy is
unlawful”, White and Case, August 2022, online, accessed 31 March 2023
https://www.whitecase.com/news/media/landmark-high-court-decision-uks-net-zero-strategy-unlawful
Comments
Post a Comment