As we rebuild the economy after Covid-19 and pursue the government’s aims to ‘Level up’ and ‘Build back better’, the greening of finance has become increasingly important. With the impacts of climate change ever more apparent, politicians seek to appeal to the ‘green vote’.

The legislative measures to boost the battle against climate change include: mandating the UK’s main financial regulators to factor in climate-related issues; statutory requirements for pension schemes to address the international Taskforce on Climate-related Financial Disclosures (TCFD) requirements in the 2021 Pension Schemes Act; and requiring large firms and financial institutions to publish climate plans well ahead of the TCFD recommended timeframe.

Such trailblazing policies demonstrate the government’s determination to be a global leader in green financial issues, but they are only a start.

Long-term investors

The government alone cannot solve this. Nevertheless, the UK is well placed to capitalise further on sustainability trends thanks to our multitrillion-pound domestic pension and insurance assets. These long-term investors could be incentivised to fund substantial green growth-boosting initiatives, deliver badly needed infrastructure, improve the housing stock and benefit from successful projects offering better investment returns than bonds.

Both defined benefit and defined contribution assets could be used. At the least, the £200bn invested in local authority pension schemes could help fund nationwide green investments, especially as taxpayers underpin the pension promises (they do not belong to the Pension Protection Fund), so there is a social interest in ensuring long-term growth that helps overcome deficits.

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