The UK government released this morning its update to the Green Finance Strategy which establishes commitments to deliver on the UK’s green finance promises including a UK Green Taxonomy.

The strategy will set out how the government will encourage green finance for nature-based solutions such as tree planting and peatland restoration and support farmers to access new private sector revenue streams whilst protecting the natural environment.

The government has set a target to raise at least £500m in private finance to support nature’s recovery every year by 2027 in England, rising to more than £1bn per year by 2030. This will support greater biodiversity and contribute to achieving te government’s environment targets.

Environment secretary Thérèse Coffey MP said: “We need a healthy and thriving natural environment to meet our net zero goals and build our resilience to climate change.

“Our announcement today sends a signal that the opportunities from investing in our farmland, forestry, peatlands and marine areas are great and offer long-term rewards for people and nature.”

Alan Lovell, chair of the Environment Agency, said: “The appetite to invest in nature exists, and the Green Finance Strategy and the Nature Markets Framework will help unlock that potential and develop markets for a greener UK.”

He said the Environment Agency was working with the government to support private sector investment in climate adaptation and nature recovery, including through the Natural Environment Investment Readiness Fund.

“Financing work like nature-based flood alleviation schemes will help us reduce the economic costs of climate impacts in the coming decades,” Lovell added.

“Mobilising the investment needed for net zero is one of the biggest challenges, and opportunities, for the UK. Without finance, the transition cannot happen – today’s Green Finance Strategy makes that clear,” according to E3G, an independent climate change think tank.

Progress continues to be made on transition plans. The government will consult on making transition plans mandatory for all large companies, including private companies, on a comply or explain basis. This would create consistency with listed companies that are required to disclose transition plans by the Financial Conduct Authority.

The government is also launching a Transition Finance Market Review.

Kate Levick, associate director for sustainable finance at E3G, said: “Creating new regulatory norms for private sector transition planning is an urgent task if we are to unlock investment at scale for the net zero transition. Today’s announced consultation on extending transition plan requirements to large private companies is welcome progress. This will help companies embed climate transition in business planning, and will also help investors to confidently allocate capital.”

However, the investment roadmaps and tracking announcements do not yet amount to a UK Net Zero Investment Plan, E3G noted. The UK’s largest financial institutions and corporations have repeatedly called on the government to produce a regularly updated, whole-of-economy Net Zero Investment Plan.

“Focus now turns to delivering these promises, and to filling gaps left by the Green Finance Strategy, including clear net zero mandates for UK regulators. In a day of energy efficiency disappointments, the Green Finance Strategy update has made a good start. Still, significant sectoral progress is needed before the UK pips the US and EU to the post on global leadership,” the think tank stated.

Heather McKay, senior policy advisor at UK Sustainable Finance, said: “Today’s Green Finance Strategy is a marked improvement on the UK’s strategy in 2019 – with a welcome focus on mobilising investment across the country. However, we’re also nearly four years on, four prime ministers later and four years closer to climate catastrophe. The UK must move from consulting on promises to delivering results. 2023 will be a critical year for the UK to put its money where its mouth is on mobilising global green investment.”

Fiduciary duty clarification

James Alexander, chief executive officer of the UK Sustainable Investment and Finance Association (UKSIF), welcomed the covernment’s consideration on clarifying the fiduciary duty.

“We are optimistic that this could help address the present confusion we see among pension schemes and more widely, and how environmental, social, and governance (ESG) risks, opportunities, and impacts should be considered as part of these duties,” he said.

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