A new centre is being launched in the UK with the aim of arming financial institutions with the data and analytics they need to contribute to the shift to environmentally sustainable economic activity. Asset owners have been keen to support the project.
Dubbed the UK Centre for Greening Finance and Investment (CGFI), the new institution will begin work in April, with physical research hubs in Leeds and London to open shortly thereafter. The centre is being financed by a £10m government investment.
According to a government announcement, CGFI has been established to accelerate the adoption and use of “world-class” climate and environmental data and analytics by financial institutions. A key focus of the work will be on enhancing the quality and availability of inputs for data providers to improve their products and services.
“Access to scientifically robust data and analytics is currently patchy and unreliable,” said the Smith School of Enterprise and the Environment at the University of Oxford, which will be leading the centre.
“Armed with better information, underpinned by innovative science, financial institutions around the world will be much better placed to make decisions that contribute to a more sustainable planet.”
The research to be conducted is intended to support the creation of new products and services, such as cutting-edge technologies that measure severe storms and flood risks for property investors and tools that can improve data on industrial pollution linked to investment portfolios.
Asset owners keen
UK pension funds, who are under increasing pressure to address climate change, lent their backing to the CGFI. The government is currently consulting on a climate change reporting and governance regulation for pension funds.
“USS was asked to support a bid for developing a UK Centre for Greening Finance and Investment which has the aim of providing pension funds and other investors with information to help manage climate change and other environmental-related risks,” said David Russell, head of responsible investment at USS Investment Management, the in-house investment manager for the UK’s £67.6bn (€77bn) higher education pension scheme.
“The project seemed an obvious one for us to support as it has the potential to provide the scheme (and other funds) with helpful climate-related information which could help manage this long-term risk.”
“We supported this initiative because we were impressed by the calibre of people involved and especially the focus on asset owners, as well as asset managers”
Ian King, head of equities, Tesco Pension Investment
Tesco Pension Investment has also been involved with the CGFI bid.
“We supported this initiative because we were impressed by the calibre of people involved and especially the focus on asset owners, as well as asset managers,” Ian King, head of equities, told IPE.
“With our involvement in the centre we will have a great opportunity to represent the members of our pension schemes in such an important area and one that we, our members and our trustees all take very seriously.”
According to USS’s Russell, the pension investor will be providing support to the centre in-kind, for example by attending workshops and meetings on research and development gaps, access to relevant data and investment teams, and advice on reviewing and framing the key issues facing UK pension funds.
The BAE Systems pension fund also supported the CGFI, and IPE understands HSBC Pension Fund did, too.
From the UK government’s point of view, the centre delivers on commitments made in its 2019 green finance strategy and furthers its green finance leadership ambitions, not least in light of its goal to reduce emissions to net-zero by 2050.
“We’ve set the ambition for net zero – now we must ensure our financial sector has the tools and information to get behind the transition,” said John Glen, economic secretary to the Treasury and City minister.
CGFI is being established by a consortium of major UK institutions. In addition to the University of Oxford, it involves four other universities, The Alan Turing Institute, Satellite Applications Catapult, and the Science and Technology Facilities Council.
According to the centre, the consortium reflects a strategy to bring together a diverse range of expertise, across climate and environmental risks, disciplines, financial institutions, and geographies, “required both to meet the needs of financial institutions now and to create the strong, broad foundation necessary to scale-up the envisioned world-leading national centre for the long-term”.
Areas of expertise include earth systems, data science, water, engineering, statistics, with career researchers as well as those with practitioner backgrounds involved.
“The CGFI will allow financial institutions to access scientifically robust climate and environmental data for any point on planet earth now and projected into the future, and for every major sector of the global economy,” said Ben Caldecott, director and principal investigator of CGFI, and Lombard Odier associate professor of sustainable finance at the University of Oxford.
“Doing so will create public goods and unlock innovation.The UK is perfectly placed to transform the availability of climate and environmental data in finance. We have world-leading capabilities in all the various areas that need to come together to solve the problem.”