COP26 and the post-pandemic recovery period provide us with a unique opportunity to build strong foundations for a sustainable, carbon-neutral, and fairer future. “Building back better” will require an unprecedented level of sustainable investment, directed not only at projects reducing carbon emissions, but also those focusing on strengthening social resilience.
Reaching net zero targets and “levelling up” communities cannot be done by one organisation alone – it must be a joint effort of the public and the private sector. Effective public policy and deployment of public finance can have a catalytic impact on mobilising the right scale of private investment to reach national and global net zero targets.
Ahead of COP26, the CBI outlines sustainable finance policy recommendations to UK policymakers on how to effectively mobilise capital to achieve the UK’s net zero targets and tackle other pressing environmental and social challenges.
Top recommendations for government
To help finance the transition to a sustainable future, corporates and finance providers need a regulatory and policy framework with a solid set of principles focused on the transition process itself. Businesses recommend policymakers to:
- Principle 1: Support the whole domestic economy transition with effective sectoral plans and mechanisms that can unlock critical sustainable finance flows.
- Principle 2: Ensure appropriate policy frameworks and unambiguous regulation to allow the financial services sector to drive the growth of sustainable finance and avoid unintended consequences hindering the transition to a net zero economy.
- Principle 3: Promote international convergence in sustainability and reporting standards to scale up ESG investments beyond the UK’s borders and ensure a smooth and just global transition.
The three guiding principles should inform policy frameworks and solutions aimed at delivering three pillars of a sustainable future: a sustainable economy, sustainable markets, and sustainable communities.
These three key pillars of action are complementary. There is a need for effective sectoral transition plans to secure a pipeline for investable projects. Meanwhile, appropriate policy frameworks and unambiguous regulation are needed to drive the growth of sustainable finance and efficiently channel the capital to the real economy. Finally, it will be impossible to secure a sustainable future without making sure that a transition to a green economy is just and that our communities build up resilience to deal with systemic shocks, such as pandemics.
What does this mean for business?
Businesses recognise the key role of private capital in the transition to a sustainable future and unlocking opportunities in a net zero economy on sustainable finance policy. This report was written in collaboration with the CBI’s broad membership and reflects the views of businesses from a broad range of the economy. It can support businesses in their own engagement with policy officials and a broader range of stakeholders and inspire further action to build a more sustainable future.
Looking ahead the CBI will continue to explore what further steps are required to finance a transition to a sustainable future at COP26 and beyond. We are actively engaging on creating the UK green taxonomy as part of the Green Technical Advisory Group and are looking forward to working with the government on enhancing the ambitions of the Green Finance Strategy in 2022.
If you would like to discuss our work on sustainable finance, please contact Julia Jasinska.