In the past 24 hours both the Conservative and the Labour Party have each set out measures and policies for financing and delivering a green recovery.
Speaking in the House of Commons on Monday afternoon the Chancellor outlined the Government’s intention to begin issuing green bonds. Subject to market conditions, the first of these bonds will be issued in 2021 with the aim of financing projects that will help to tackle climate change and deliver the UK’s net-zero emissions target by 2050.
This announcement came alongside a raft of other measures focused on improving the robustness of the regulatory frameworks that govern the disclosure businesses and investors are required to give in relation to their climate-related investment activities.
When pushed for the Government’s position on the possible introduction of a UK Investment Bank, that could contribute to unlocking significant volumes of green finance, the Chancellor confirmed that an announcement in this area will be made when the National Infrastructure Strategy is published later this month.
Labour’s Green Economic Recovery
In a new report launched on Tuesday morning the Labour Party have gone a step further by fully committing to the need for establishing a UK investment bank for financing green projects and programmes.
A UK investment bank to replace loss of access to European Investment Bank (EIB) finance is something that the ICE has consistently called for ever since the EU referendum took place in 2016.
The EIB has for decades been a source of anchor investment, encouraging other private finance by acting as a first mover on projects which might otherwise struggle to obtain financing from other institutional investors e.g. projects in the offshore wind sector.
In the years 2014, 2015, 2016 the EIB provided finance for transport and energy projects in the UK to the value of €11.5bn. Following the EU referendum, the EIB then made investments in UK transport and energy projects for 2017, 2018, 2019 to the value of €1.6bn. Representing almost a 90% decrease.
It is critical that the UK puts in place an institution that replicates the EIB’s functionality, with a mandate for investing in environmentally sustainable infrastructure projects. A point reiterated by Chris Richards, ICE’s Director of Policy, who spoke alongside the Shadow Chancellor, Anneliese Dodds MP, on a cross-industry webinar that was also held on Tuesday morning.
Labour’s report also identifies the need for Green Book reform so that the government’s approach to appraising public investments and projects more effectively takes into consideration long-term policy objectives like the 2050 net-zero emissions target.
ICE has been running a consultation exercise examining how this might be done and will publish the findings in the coming weeks.
Balancing short and long-term policy priorities
The ongoing need to manage the impacts of the Covid-19 pandemic on UK businesses and communities rightly remains the government's short-term priority.
However, it is important that the spending review that takes place towards the end of this month is used as a platform for the government to put forward its long-term plans around national infrastructure planning and delivery.
A National Infrastructure Strategy, underpinned by a UK investment bank, that systematically addresses the UK’s long-term challenges in relation to climate change, population growth and other demographic factors continues to be urgently required.