A coalition of 30 major asset managers, banks and investors – boasting Schroders, BlackRock, Barclays, and NatWest among others – have urged the UK government to issue a green bond to support investments in projects designed to decarbonise the UK economy and tackle social inequality.
Reuters reported that the proposal involves a sovereign bond developed by the Green Finance Institute (GFI), Impact Investing Institute (III) and LSE’s Grantham Research Institute on Climate Change and the Environment, and has been dubbed ‘Green+ Gilt’ by supporters.
Unlike other conventional green bonds, Green+ Gilt has the added benefit of also addressing social inequality issues, by targeting the widespread job losses caused by the Covid-19 pandemic.
Its developers have argued that it would help to reboot the UK economy, while also helping to achieve the government’s goals of tackling regional inequalities and reaching net zero carbon emissions by 2050.
The project’s developers said in a joint statement that it would “catalyse the development of a sterling green bond market and deliver a strong signal to capital markets and international policymakers of the UK’s commitment to sustainable finance ahead of its presidency of the COP26 UN climate summit in Glasgow next year”.
Professor Lord Nicholas Stern – IG Patel Professor of Economics and Government, and Chair of the Grantham Research Institute, London School of Economics and Political Science – added:
“The UK needs a strong and sustainable recovery from COVID-19. A Green+ Gilt is a key instrument that the Government should deploy to help channel savings into programmes and projects that enable us to build back greener in the places that need it most.
It can signal the direction of future opportunities and reduce perceived risk. Now is the time to be ambitious. Green investment can have rapid impact and drive strong and sustainable growth”.
The issuance of green bonds have increased rapidly around the world in recent years. Some $200 billion have been issued already in 2020, with a cumulative total of $1 trillion since 2007.
Just last month, Germany’s government raised €6.5 billion in its first-ever green bond, and the European Union is reportedly considering issuing more green bonds as part of its economic recovery programme in the wake of the coronavirus pandemic.
A total of 16 countries have so far made commitments to green bonds. In Germany and Sweden, both issues were oversubscribed, but the UK government remains to join the movement despite claims of being a world leader in green finance.
Miles Celic, Chief Executive at CityUK, urged the government to catch up with its continental rivals:
“Acting on this proposal would show real UK leadership in green finance by bringing to market a green sovereign bond that has clear social impact characteristics.
There is huge appetite for more sustainable finance investment opportunities. The UK must continue to develop its competitive edge in delivering financial solutions to some of the most pressing social and environmental challenges facing the world today”.