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  • Writer's pictureNoel Gannon

Transitioning into the green financial services economy

At the end of the first quarter of 2023, the FCA published an announcement to state that ‘regulators are set to welcome the UK Government’s updated Green Finance Strategy’. The recent strategy provided a renewed focus on climate change and was supported by following regulating bodies: the FCA, the FRC, the BoE and the TPR.

The ESG market is very active for investors. The global worth of assets under management (AUM) is set to reach $34 trillion by 2026, the UK government recently confirmed in its 2023 report called ‘Mobilising Green Investment’. This figure demonstrates tremendous growth in comparison to the report $2.2 trillion in 2015 and $18.4 trillion in 2021. In the same report, the government shared its domestic estimation that in the year of 2022, ‘£23 billion of new low carbon investment was delivered in the UK’. Such investments were inclusive of energy storage, carbon capture, renewables and hydrogen.

With these investments continuing to gain momentum, a key concern for UK regulatory bodies is to maintain and monitor a successful attitude to risk. By preparing to do so, regulators aim to maintain the resilience of the UK’s financial system, the integrity of its markets and to ensure a seamless and effective transition towards the UK’s net zero goal.

Andrew Bailey, Governor of the Bank of England commented to the FCA that 'Climate change affects our planet, our economy and our financial system. It is undeniably relevant to the Bank of England and the objectives it is tasked to meet. By doing so, the Bank of England will be working towards creating a financial system and macroeconomy that is resilient to risks from climate change’.

Noel Gannon, CFO at Alternit One shares his view regarding green finance, stating that: "rather than sitting back and fearing the arrival of onerous legislation, we have become actively involved in creating our own ESG strategy at Alternit One. We are in the middle of a materiality assessment which will give direction to where we invest our efforts and are also participating in the Heart Of The City Foundation for Responsible Business programme being run by the City of London Corporation. This is proving to be a great resource for us as it adds to our background knowledge in understanding how we develop our strategy, create targets and monitor progress. We have access to business experts and case studies and rather than feeling daunted by the prospect of change we are excited about what we can achieve."

Such steps are necessary as the UK makes strides towards a greener future. In the Chancellor’s 2022 Autumn Statement, green finance was established as an integral part to the country’s vision, with both the financial services and green sectors being deemed as key growth sectors for the UK. As investors keep their eyes on the future, there is a great deal of work to be carried out in order to ensure the successful transition into a green financial economy and in turn investing in green financial services.

The FCA is holding financial services firms to account with regards climate related matters within their regulatory perimeter. Greenwashing was noted as a significant risk to the UK’s transition into a green financial economy, investors and undermines market integrity. Nikhil Rathi, Chief Executive Officer of the FCA has expressed that the ‘Green Finance Strategy represents an important milestone’ for the industry.

The FCA is keen to ensure the correct information is available to investors, so is working alongside the International Sustainability Standards Board to ensure standardisation for green investments.

In order to truly embrace the future of green finance, firms need to establish a robust ESG data and reporting strategy that not only adheres to FCA guidelines and the goals set out in the Green Finance Strategy, but also supports comprehensive and accurate investor reporting. Meaningful and reliable data is key. A clear data reporting strategy an important tool for firms to manage their own environmental and social impact, but also builds trust and showcases transparency to investors.

At Alternit One, we can support clients who wish to build high performing data reporting strategies that are fit for purpose within the UK regulatory framework. If you would like to learn more about how we can help your business embrace the future of the green financial services economy, contact us today.

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