Back in July when the chancellor first unveiled his summer economic update, Rishi Sunak’s £3bn green investment package – to be spent predominantly on improving the energy efficiency of public sector buildings – received a  lukewarm reception from green experts and industry figures alike. While many applauded his commitment to sparking a green recovery, there was a general consensus that more – much more – needed to be done. 

That was the context, then, for  Sunak’s announcement last Monday of plans by the UK government to issue Britain’s first green bonds, also known as gilts, in an attempt to capitalise on growing investor demand for assets that fund environmentally-friendly projects. Indeed, the market for green bonds has soared significantly in recent years, with about $250 billion sold globally last year, representing about 3.5% of global bond issuance. 

It has long been claimed that green recovery can only be achieved if and when the private and public sector work in tandem. With investment managers understanding that being profitable and environmental can in fact go hand in hand, the Chancellor’s move to issue the first UK green bond is significant, as it signals to investors a ringing endorsement from the government in providing political certainty to the sector.  

Requiring banks, insurers and pension schemes to disclose the threats to their business from climate change by 2025 represents yet another positive development, as it will effectively provide financial markets with the reliable climate-related financial information needed for better risk assessment and strategic planning.

In setting out his policies, the chancellor highlighted the critical role that financial services will play in enabling attempts by the UK to achieve a net-zero carbon target by 2050. While the green road to a post-crisis recovery will, realistically, be a long one, Sunak’s move to foster the flow of private capital towards facilitating a sustainable economy is undoubtedly an essential first step in the right direction.