COP26 hustings: sustainable finance in action

Businesses will be at the forefront of innovation and investments in decarbonisation. At COP26 in Glasgow, the CBI gathered business leaders to showcase how sustainable finance can power exciting and vital projects in the real economy.

Speakers:

• Rain Newton-Smith, Chief Economist, CBI
• John Godfrey, Corporate Affairs Director, Legal & General Group
• Judith Cruickshank, Regional Managing Director, NatWest
• Dr Ifeyinwa Kanu, IntelliDigest
• Richard Thompson, Partner, Foresight Group
• Linus Hagg, Chief Financial Officer, Arise - Skaftåsen Wind Farm

Moderator: Roger Harrabin, BBC

Opening message from Economic Secretary to the Treasury John Glen MP.

Money for decarbonisation is available

Finance is going to be crucial to delivering the outcome of COP26 on the ground. Speakers from the financial services sector showcased that the money for decarbonisation is available – the key is to make sure that it is used in the right way.

Legal & General aims to deliver change by investing in net zero homes and contributing to the decarbonisation of building stock in the UK. NatWest sees a huge potential for SMEs to take climate action and supports them in reducing costs, accessing new markets, and making them more attractive to consumers with new investments. It works with companies such as IntelliDigest, which develops sustainable solutions in the biotech and food space. Richard Thompson pointed out that private equity also has a big role to play in furthering decarbonisation. Foresight Group focuses its investments on different areas, such as decarbonisation of power systems, transport, production of food and manufacturing, as well as nature-based solutions. Its support is crucial for developers of projects on the ground, such as Skaftåsen Wind Farm.

Investor support goes beyond financing

The finance sector can provide money for decarbonisation, but support goes beyond financing. Dr Ifeyinwa Kanu, CEO and Founder of IntelliDigest, received help from Royal Bank of Scotland to successfully move from an academic to an entrepreneurship position. She participated in RBS’ Climate Accelerator Programme, which gave her an opportunity to think deeper about the purpose of her business, how she is leading it, and what her impact is on society. NatWest also helped her close IntelliDigest’s crowdfunding round through its Back Her Business programme, which aims to reduce the gender gap in entrepreneurship.

Linus Hagg from Arise said that there is plenty of capital available. The key to success, however, is finding knowledgeable investors, such as Foresight Group, who understand technical aspects of the industry and know how to structure the investment effectively.

The role of the government is to create the right policy frameworks

Economic Secretary to the Treasury, John Glen MP, said in his opening remarks that collaboration between businesses, financial institutions and government is crucial if we’re going to make immediate progress to green the economy. Rain Newton-Smith agrees. Trillions of dollars are needed to close the financing gap for net zero, she said, and only businesses – in collaboration with the government – can provide the scope of innovation and investment needed to achieve net zero targets.

The CBI outlines how to finance the transition in the recent sustainable finance policy paper. Rain pointed out that to drive sustainable finance investments, businesses need the right projects in the economy to get behind – from wind energy to hydrogen. They will also need effective regulation. The CBI has been pleased to see that the Government’s recent Greening Finance Roadmap focuses on outcomes in the real economy. As we move forward, we need to ensure the development of global sustainability reporting standards with consistent data and metrics. The announcement at COP26 that the IFRS Foundation will create an International Sustainability Standards Board is a step in the right direction.

We need to ensure an orderly and just transition, which considers social benefits

Some sectors are harder to decarbonise than the others, and we can’t walk away from them, said Legal & General’s John Godfrey. During the transition process, the financial services sector needs to enable these hard to abate sectors to change in an orderly way.

Decarbonisation can, and should, go hand-in-hand with social benefits, as pointed out in the CBI’s sustainable finance position paper. One of L&Gs business lines, which focuses on generating 50,000 homes across the UK, shows how it can be done in practice. All of the houses will be net zero from 2030 with an EPC A rating standard. The solutions are good – not only for the planet – but also for the people. L&G invested in heat pumps and new types of modular construction, which will make the houses cheap to run for people living in them. Moreover, one of L&G’s goals is to create the UK’s first carbon-neutral retirement community in the UK. The project is not only environmentally positive but also smart from a public health perspective, as research shows that such retirement communities tend to have lower GP visits than others. Finally, investment in net zero buildings and precision homes could lead to regional growth and be an important industrial cluster for the North of England, argued John Godfrey.

For more inspiring case studies of sustainable finance in action, see our article:  https://www.cbi.org.uk/articles/sustainable-finance-in-action/