Forging a credible path to net zero, one financial barrier at a time

UK Finance completed its autumn climate webinar series with Paul Chisnall, Director, Sustainability, interviewing Dr Rhian-Mari Thomas, Chief Executive of the Green Finance Institute (GFI). Rhian-Mari delivered a whistle-stop tour of the GFI's approach and growing list of activities since its creation last year, providing a clear template for action which is already garnering interest overseas, as evidenced by the international flavour of the 300-strong audience.

The interview also delivered some highly quotable lines, not least:

  • ?We?re not going to be able to shrink our way to greenness? denoting that innovation and finance is needed as much as risk management, and
  • ?Finance will never be a panacea, but it shouldn't be a barrier?

GFI's approach

Rhian-Mari began by setting out the GFI's approach, which can be described in two words: ?financing green?. In contrast to ?greening finance? - which focuses on risk, reporting and disclosure, and is encapsulated in the work of the Task Force on Climate-related Financial Disclosures (TCFD) - the GFI will ?complement that great work by focusing on practical measures to accelerate the deployment of capital in the real economy, addressing barriers to investment and barriers to scale?.

The GFI's approach is built on two pillars: working sector-by-sector and working collaboratively by convening the widest possible range of experts. This was applied in the creation of the GFI's first coalition, which looks at green finance in the housing sector, the Coalition for the Energy Efficiency of Buildings (CEEB).

Bricks, mortar and more

The housing sector is responsible for around 30 per cent of emissions in the UK, and it has been estimated that £65 billion of investment will be required by 2030 to get the sector on the path to net zero. But as Rhian-Mari explained, this £65 billion ?is not a monolithic block? - it is a number of specific realignments within the financial sector.

In response the GFI created the CEEB, which has already initiated 21 demonstration projects, each targeting a specific market barrier or misaligned incentive. Rhian-Mari provided some specific case studies, such as the CEEB's work on the Green Home Retrofit Principles.

Having already made such an impact in the housing sector, the GFI recently launched a task force on heating. It is soon to replicate the template by launching coalitions on transport and on nature-based solutions, and work was progressing on devising a sustainable import guarantee.

Just transition

In greening the economy, Rhian-Mari recognises that the change will be more comfortable for some than for others. She expressed empathy for the many people who make their living from activities seen as being no longer sustainable. The need to bear in mind the impact of change on real lives and communities is the central theme of the report published recently by the Grantham Research Institute and London School of Economics, with the support of UK Finance, Financing climate action with positive social impact: How banking can support a just transition in the UK.

Bright, green future

In closing the webinar Paul asked Rhian-Mari whether she sensed that we are on the cusp of turning the developmental work into meaningful, scalable action. She gave an emphatic ?yes, I do? in response, expanding by saying that ?most financial services providers now are fully aware that climate risk poses financial risk, and the sector needs to respond both by managing and mitigating that risk and also by seizing opportunities? The nature of the conversation now is changing from ?why? to ?how??.

The upcoming Green Horizons Summit (9-11 November), which the GFI is co-hosting and which will feature sector heavyweights such as Mark Carney and Christine Lagarde, will be an excellent opportunity to learn what is coming next in this fast-moving space.

Watch Rhian-Mari Thomas discuss the GFI's action to date in a UK Finance webinar, Green Finance - Practical Steps to Unlocking the Opportunity, which aired on 20 October.