To ask Her Majesty’s Government what action they will take to support the United Kingdom as a global green finance centre following the City of London’s fall to third place in the Global Green Finance Index published in September.
My Lords, I beg leave to ask the Question standing in my name on the Order Paper. In doing so, I bring to the House’s attention my non-financial interest as a trustee in the Green Purposes Company.
My Lords, the Government place a high priority on green finance and take extremely seriously the UK’s position as a leading centre. To support these efforts, the Government will publish a green finance strategy in spring 2019. The strategy will set out the Government’s green finance ambitions as well as new actions that the Government will take to complement existing efforts.
I thank the Minister for that reply. In many ways, I welcome the Government’s enthusiasm in this area, but a great opportunity was lost this week in the Budget when the Chancellor did not announce that the UK would issue a green sovereign bond. If we exhort that corporate green finance bonds should be issued in this country, we should be an example and issue a green sovereign bond. Does the Minister get that?
I get the question, but I do not necessarily agree with it. Green finance is exciting and is growing, and the City of London is at the forefront internationally. We are ranked third in the league table that the noble Lord mentioned, but first for the quality of the green finance. Our approach is that where the private sector—the City—provides leadership in developing these investments, that is the best outcome and the Government should support it through our strategy but should not necessarily participate and potentially crowd it out.
My Lords, having dinner yesterday evening with the CEO of the London Stock Exchange, Nikhil Rathi, made me aware that green finance is one of its big priorities, including the establishment of a green sustainable investment centre. Will my noble friend join me in welcoming the development of green indices which can prompt institutional investors to shift their asset allocation to sustainable investments?
I can see that the Chief Whip is taking note, as many of us were here until the early hours on the Northern Ireland legislation, so I hope my noble friend has not disclosed too much. The point on indices is right; I absolutely agree with that. The very fact that we are having this Question is because indices were produced and people could see where they ranked. The more that people see the data surrounding this, the more they can make informed decisions. That is why it was good that the Bank of England announced a couple of weeks ago that it is going to ask the Prudential Regulation Authority to ask banks and insurance companies to factor the climate into their investment decisions.
My Lords, the Government will be aware from the Ernst & Young report that investment in green projects in the UK is down by nearly 70% this year. Does the Minister believe that that is in any way related to the Government’s decision to sell off the Green Investment Bank, which at one time provided essential seed money and leverage to give these projects lift-off?
The investment going in is substantial. We are a leader in this area. Since 2015, the rate of emissions has fallen faster in this country than in any other G20 country, which we can be proud of. The fact that one in five electric vehicles sold in Europe is manufactured here in the UK is again something that we can be proud of, and we are investing heavily in that. We have a clean growth strategy, and an industrial strategy that has these issues at its heart.
My Lords, the International Panel on Climate Change emphasised just how urgent it is for Governments to act. The Minister cannot produce the gloss that we are doing rather well on investment when we have slipped from first place to third, behind the Netherlands and Sweden. He has to recognise that there are aspects of government policy, such as fracking and the fact that the Government are reducing their subsidies for green energy—I will not mention Brexit at this stage—that must cause concern among investors and help to produce a rather more depressing picture than the Minister has suggested.
I do not accept the picture that the noble Lord is painting. In the index that we are talking about, the City of London was ranked number one in the world for the quality of green finance offered—something that we can be proud of. It has gone down to number three in terms of penetration, but look at other financial centres: Paris was fifth, Frankfurt 21st, Tokyo 29th and New York 39th. The City of London is leading the global agenda on leveraging private finance to meet the challenges identified by the IPCC, and we should celebrate that.
My Lords, could my noble friend enlighten us on what is a green technology and what is not? It would be very easy to get green finance for projects that burn wood to make electricity but impossible to get it for projects that burn gas to do so, even though burning wood produces at least twice as much carbon dioxide as burning gas. Why?
Of course my noble friend has great expertise in this area—which is always code for saying, “That’s an awkward question”. He raises a pertinent point. When it comes to issues of green finance, it is important that we get the definitions right. That is why the British Standards Institute is looking to define the standard for qualifying for green finance, so that it can then be applied rigorously across the board to a range of investments and provide greater clarity and certainty for investors when making decisions.
In relation to the Global Green Finance Index, to which the original Question referred, does my noble friend agree that when the same survey identified those finance centres that are likely to do best in the next two to three years, the three that were cited were Paris, London and Luxembourg?
That is why we are investing as we are. We had the Green Finance Taskforce, led by Sir Roger Gifford. That led to the announcement that we are going to set up a green finance institute to further enhance our leadership role. Next year we are going to launch the green finance strategy, which again will strengthen our ambition to provide global leadership in this important and growing area.