Going green – the UK looks to issues its first green gilts

The government’s plan for a new Sovereign Green Bond, announced on the 9th November, has the potential to play a key role in financing a greener economy as the UK looks to achieve net zero by 2050.

While the investment management industry keenly awaits full details of the government’s plans, we are supportive of the initial proposal, and indeed have been calling for this type of gilt.

Covid-19 has changed all our lives in immeasurable ways, and much has been said about how we can take this moment of upheaval to build back our economy and our society in a way that works better for all.

This has been reflected in the huge growth in savings being put to work in responsible and sustainable investment funds throughout the pandemic, as savers choose to put their money to work for public good, as well as a return. This year so far has seen record investment into responsible investment funds, with over £7bn invested into such funds. This is up from £1.9bn for the first three quarters of 2019.

There is clear demand for green instruments in general and green gilts specifically and our industry is keen to play an active role helping government develop a gilt that will satisfy investor’s needs and allay greenwashing worries.

Green bonds, both corporate and sovereign, could make an important contribution to the growing range of investment strategies in place to meet clients’ non-financial investment objectives. They may also play an important role, alongside equity, in financing the investment that companies and governments will need to make a sustainable transition.

We all have a responsibility to take action on climate change, and the issuance of a sovereign instrument that attracts private capital into green recovery and growth will be an important signal to demonstrate the government’s commitment to its 2050 net zero target, clean growth and the green economy.

That’s why I and the Investment Association support the Chancellor’s announcement and are keen to ensure the structure delivers for government, investors and society as a whole