Vision for Economic Growth — a roadmap to prosperity 35 Big move #6 Benefits Key actors (non-exhaustive) The government has said that its Net-Zero and British HMT; the FCA; Department for Energy Security and Energy Security strategies will leverage £100bn in Create the conditions to scale and Net Zero (DESNZ); FRC; BBB; UKIB; UKEF; FPS Industry 103 The right private sector funds between now and 2030. Participants; Green Finance Institute; Impact Investing accelerate finance for a just transitionenabling conditions can help to unlock this capital. Institute; Civil society organisations. Figure 13: Key levers available to help influence real economy emissions reductions Reaching net zero represents the transformational across sectors (eg long-term hydrogen o昀昀take growth opportunity of the 21st century. Finance must agreements and incentives to retro昀椀t steel plants). In昀氀uence on real Asset Asset Professional By providing further detail on its own plans, the UK i 昀氀ow to businesses that have committed to credible Lever typeLevereconomy emissions Banks managers owners Insurers services Government can encourage the mobilisation of transition plans and are delivering against them. New capital Capital market Proactively steer capital private 昀椀nance in support of the transition. Governments have a critical role to play in providing investments originationmarkets origination towards net zero aligned projects unequivocal signals. In the UK, without further policy • Support the scaling up of private 昀椀nance and and corporates, including clarity, the required capital will not mobilise at the de-risking of projects in support of the transition. through labelled green and transition 昀椀nance scale and pace needed. So accelerating 昀椀nancing for Equity investments merit special attention, as the transition 昀椀rst requires an ambitious, visionary General Consider corporate net zero does infrastructure. Building energy e昀漀ciency purpose lending alignment as part of lending and credible domestic energy and industrial policy retro昀椀ts was one area that the CCC highlighted decisions, re昀氀ected through, framework beyond what has been set out to date. Next for instance, loan covenants to be below the necessary level to reach net zero and exclusions there must be regulatory support for interoperable 100 targets, for example. The UK National Infrastructure frameworks and approaches, and scaling-up of a Commission’s 昀椀ve-year report, due in October, will Specialised Proactively steer lending wide variety of 昀椀nancing solutions. Finally, political lendingiitowards lower carbon projects, o昀昀er a crucial analysis of what needs to be done to assets or infrastructure, support for 昀椀nancing the sectors which are critical to 101including through labelled support investment. TheCityUK’s report earlier green and transition 昀椀nance the transition and have set credible transition plans, this year also highlighted recommendations to including those that are “hard-to-abate”, is crucially Insurance Provide risk management mainstream “green” investment and R&D incentives and risk to support the development important. This will help advance decarbonisation 102 for services. Streamlining planning and permitting management of low carbon projects; e昀昀orts. It will also enable growth of economically viable processes, including connections to the grid, would consider net zero alignment in underwriting decisions technologies and solutions to advance the transition over speed up development and implementation of the long term. This e昀昀ort will require collaboration across Managing Security Consider the emissions and the 昀椀nancial system and across value chains (see Figure projects, further attracting investors. Long-dated invested selection and transition pro昀椀les of corporates energy projects match long-term liabilities so the capitaltrade facilitation as part of security selection 13). There must also be a focus on creating a transition decisions facilitated in the that is just, which will require a consideration of climate outcome of Solvency II reform will be critical. There secondary markets will also need to be consideration for the key delivery issues alongside other outcomes, as outlined by the StewardshipLeverage voting rights and role that di昀昀erent authorities and regions will play 99 in昀氀uence to encourage corporate Impact Investing Institute. The key actions are:across the UK.management teams to take steps iii • Provide further clarity and commitment around • Create con昀椀dence among 昀椀nancial institutions to drive decarbonisation Investment Create and market net zero sector-speci昀椀c policies to deliver on net zero that they can support 昀椀nancing the transition productsaligned savings and investment commitments. Private 昀椀nance can invest in the without jeopardising their own Paris-aligned or products (eg funds, pensions, transition only on the bedrock of policy clarity. The net zero targets. Government must lead in setting life insurance) Skidmore Review highlighted investors’ reticence the necessary policy and enabling conditions to Investment Embed net zero considerations mandates into investment mandates to make investments given lack of transparency of achieve net zero targets and support the 昀椀nancial awarded to asset managers the government’s own priorities. The Transition Plan sector to help the real economy transition. This Availability of each lever per institution Taskforce is developing guidance for corporates and means acknowledging that 昀椀rms in energy-intensive Higher     Medium     Lower 昀椀nancial institutions that will provide the needed industries need to play a role in solving the climate transparency on credible transition plans. These crisis and that a divestment approach will not Clari昀椀cations as provided in the original publication: i. Practices vary across asset owners — some directly perform asset management activities such as securities selection and e昀昀orts must be matched on a national level with necessarily create optimal outcomes for the planet. specialist lending, while others delegate more of this activity to third party managers; ii. Specialised lending refers to: infrastructure, asset, and project-based 昀椀nancing; iii. Banks the government’s own plans. The Climate Change The building blocks must be put rapidly in place, are not equity owners but can exercise loan covenant voting. Source: table content from the Glasgow Financial Alliance for Net Zero (GFANZ) 2021 Progress Report. Oliver Wyman served as knowledge partner to GFANZ at time of publication. Figure adapted for this report to include an additional column for professional services. Refer to further detail here: https://assets.bbhub.io/company/ Committee’s (CCC) sector-speci昀椀c pathways are a including overcoming the stigma of transition 昀椀nance. good start. But more is required to translate these This will cascade from international standard-setters, sites/63/2021/11/GFANZ-Progress-Report.pdf. pathways to the level of detail required to support the in particular the International Sustainability Standards transition plans of speci昀椀c UK companies, especially Board (ISSB) whose standards are being considered for those in energy-intensive industries. Appropriate by the UK Financial Reporting Council (FRC). policy interventions will be wide-ranging and vary