Financial services and net zero

Think tank: Social Market Foundation

Author(s): Scott Corfe; Dr. Raúl C. Rosales

May 3, 2022

This report from UK think tank the Social Market Foundation looks at linking investor returns to the Government’s net zero targets.

Reaching net zero means up-front costs that need public finance. That’s an opportunity for governments to think creatively. In our latest briefing, Scott Corfe and Dr. Raúl C Rosales urge the UK government to issue ‘sustainability-linked bonds’ that would offer higher returns to investors if the Government fails to hit its net zero targets. The wider UK financial services sector also offers myriad ways to help decarbonise our economy. For instance, 70% of pensions schemes have yet to be used to fund green investments. Beyond funding, low-carbon finance represents significant jobs and export opportunities – London is currently number one globally for its green finance offerings, and low-carbon finance is expected to be the fastest growing low-carbon sub-sector of the economy. Next steps for policymakers – Government leading the charge on sustainability-linked bonds and making the UK the global centre of sustainability-linked finance – Create the right incentives for pension schemes to invest in green infrastructure – Ensuring a fairer and more consistent carbon tax framework aligned with net-zero targets.