Apr 01, 2021 04:35 PM

Road to COP26: China and Britain Can Be Proud of Green Finance Cooperation, but Not Complacent

As we move into the Year of the Ox, both the U.K. and China can clearly see the better days ahead. We know that hard work and ingenuity will unlock the huge opportunities to come. So, what are those opportunities ahead of us, and how do we get there?

As part of my role as an ambassador for the U.K.’s financial services sector, I am leading a virtual visit to China this week. My message, as we look toward our hosting of COP26 in Glasgow later this year, is that there is a particularly obvious answer to this question: the financial opportunity of the green transition. Digital technologies which didn’t even exist a decade ago provide us now with chance to make that transition a reality, and will be the investments that provide the backbone of a post-pandemic global economic recovery.

Those advances mean that the global financial community now has a clear decision to make — and for me, this was the main takeaway when I took part in the Davos Agenda earlier this year. Indeed, UN climate change envoy Mark Carney put it in crystal clear terms during his speech: because there are profitable alternatives, by not pursuing a net-zero future you are therefore choosing to become part of the problem. Investment opportunities which were once risky are now the business opportunities of the century, which will in turn create jobs and growth. Those that put environmental resilience at their core will be highly valued and desirable.

The U.K. is a global leader in the type of innovation that is leading the fight against climate change, and is already reaping the benefits. In London we know there is increased appetite from institutional investors to deploy capital into ESG investing. We have seen a rise in impact investing, including at venture capital level, and the emergence of thematic green and sustainability funds in private markets. We are third for the total amount of tech VC investment received of any country, which includes a startling 160% increase in so-called “impact tech” since 2018 — tech which directly addresses at least one of the UN’s Sustainable Development Goals, such as affordable and clean energy, sustainable cities and communities or climate action. This equates to a rise of $1.6bn over the same time period, larger than all other major economies.

With China also a global frontrunner in impact tech — second worldwide for total VC investment — there is an unprecedented opportunity for Chinese investors and firms to collaborate with U.K. startups and scale-ups.

Supporting these developments, it’s therefore brilliant news that both of our countries have made ambitious targets to drastically reduce carbon emissions by the middle of the 21st century. As President Xi Jinping said at Davos, we don’t have the luxury of rejecting change — now instead is the time for major development and major transformation. So as well as increasing collaboration in impact tech, what we must now focus is how we adapt the financial system to achieve these goals.

Fortunately, that work is well under way between China and the U.K. This is particularly evident in the Green Investment Principles (GIP) for China’s Belt and Road Initiative (BRI) — proposed at the 9th U.K.-China Economic and Financial Dialogue and signed by the U.K.’s Green Finance Initiative in partnership with China’s Green Finance Committee, with the support of both respective governments. These have now been agreed to by more than 30 companies, and are proof that our two countries — by working together — can ensure that infrastructure investment can be both profitable and sustainable, meeting the obligations of the Paris Agreement and UN Sustainable Development Goals.

And as COP26 approaches, that momentum is continuing in both countries.

Earlier this month, U.K. Chancellor Rishi Sunak announced a new net-zero innovation fund totaling 1 billion pounds ($1.37 billion), and confirmed 15 billion pounds of upcoming green gilt issuance, while China reiterated its commitment by appointing People’s Bank of China and Dr Ma Jun — one of China’s most respected climate experts — as co-chairs of the G-20 Sustainable Finance Study Group, together with U.S. Department of Treasury. This is a tremendous development between the world’s two biggest economies that I warmly welcome, and we look forward to working closely with the Group in the months ahead. We also saw the introduction of green finance regulations in Shenzhen — the first of their kind anywhere in China — and I look forward to hearing further details about China’s recently-published five-year economic plan on how it will continue the journey toward carbon neutrality. As with the pledges of more than 110 other countries, these steps should of course align with the UN’s aim to reach net-zero by 2050.

As we move ahead, I see three key objectives for the year ahead as regards to the U.K. and China’s green finance collaboration. Firstly, we must continue to increase the appeal of sustainable investment to asset managers, both globally and in China. That means better understanding the barriers for such stakeholders to adopting ESG principles, so that they may be more likely to do so in the future. Secondly, we need to continue to improve the quality of climate risk disclosures, so that we can track our progress on reducing emissions accurately and understand where further attention needs to be paid and finally — by meeting the first two objectives — we must continue the good progress on the GIP for the BRI by expanding the number of signatories.

Overall, the U.K. and China can be proud of our work together on green finance so far, and there is great cause for optimism.

But there is no room for complacency. The uncomfortable truth is that while the pandemic was devastating for the world, the effects of climate change — and the associated loss of life — will be even worse.

So in the Year of the Ox, now is not the time to let our levels slip, but rather to take control of our responsibility to the environment, and strive toward ever higher standards for how we do business. COP26 must be the platform for doing so, as we seek to achieve sustainable prosperity for both of our nations for many years to come.

William Russell is mayor of the City of London.

This article is part of a series of commentaries, in collaboration with the British Embassy in Beijing, in the run-up to the 26th U.N. Climate Change Conference of the Parties (COP26), scheduled to take place in Glasgow in November 2021.

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