This is an extract from the recently published report, 'The Future of UK Fintech - 2015-2035'.
2006
‘The Economics of Change – The Stern Review’ released by Nicholas Stern: the report assessed a wide range of evidence on the impacts of climate change and on the economic costs. The conclusion of the study is that the benefit of a strong and early action
far outweigh the economic cost of not acting.
2008
Climate Change Act: Conclusions from The Stern: Review led the UK Government to create the Climate Change Act, incorporating carbon reduction targets into UK legislation, becoming the first country to do so. Since then, the UK has reduced its emissions faster
than any other G7 country; by 44% compared with 1990.
2012
Green Investment Bank (GIB): The UK Government launched the Green Investment Bank (GIB), considered the first Green Bank in the world. It is designed to mobilise private finance into the green energy sector. GIB was acquired in 2017 by Macquarie and became
Green Investment Group. It has committed or arranged over £26 billion into green energy projects.
2015
Paris Agreement: Sustainable Development Goals (SDGs) established.
2016
Green Finance Initiative: The UK Government, in collaboration with the City of London Corporation, launched the Green Finance Initiative which aims to provide public and market leadership on green finance (at regulatory and policy level), and to promote
the UK as a leading centre for green finance.
2017
Clean Growth Strategy (CGS): In accordance with Article 4 of the Paris Agreement specifying the requirement to develop a long-term strategy for carbon neutrality, the Clean Growth Strategy (CGS), sets green finance as one of its key building blocks to achieve
this target. CGS aims to grow the UK’s national income, at the same time as cutting greenhouse gas emissions.
Green Finance Taskforce set up to accelerate growth of green finance and the UK’s low carbon economy. The taskforce published a report with recommendations for the Government and the private sector to work together towards those objectives.
2018
25 Year Environment Plan: a broader plan that forms part of the UK’s Clean Growth Strategy that includes broader environmental goals (e.g. biodiversity protection) over a 25-year period.
Green Finance Taskforce report compiled by an independent taskforce, the report detailed challenges and opportunities for green finance in the UK, setting baseline recommendations on how the UK Government and private sector can work together to make green
finance an integral part of UK’s financial services industry.
2019
Net zero emissions law: The UK passed regulations that aim to bring its greenhouse gas emissions to zero by 2050, making it the first major economy in the world to do so.26 The law legalised some of the most ambitious emission reduction targets in the world
when it was passed.
Green Finance Strategy (GFS): The GFS was published in response to the recommendations of the Green Finance Taskforce. The GFS developed major strategic pillars to enhance the competitiveness of the UK financial services sector by aligning private sector
financial flows towards clean, environmentally sustainable, and resilient growth. The GFS has three main focuses:
1. greening finance (making the consideration of climate and environmental factors a financial and strategic imperative);
2. financing green (mobilising finance for clean and resilient growth);
3. capture the opportunity (associated with the greening of financial systems and mobilising finance for UK businesses).
Green Finance Institute (GFI) established a forum that aims to foster further collaboration between the UK’s public and private sectors to create new opportunities for investors and to strengthen UK’s position as global leader in green finance.
Voluntary National Review: The UK produced its first Voluntary National Review in which it assessed and shared its progress towards the SDGs.
2021
Environment Act 2021: New, legally binding targets were set by the government to protect and enhance the environment through the improving air and water quality, tackling waste, increasing recycling initiatives and halting the decline of species abundance
following the UK’s exit from the EU. The Office for Environmental Protection (OEP) was created as new independent watchdog to enforce and monitor the targets.
Green Technical Advisory Group (GTAG) appointment of a new, expert group that provides the government with independent, non-binding advice on the design and implementation of a UK Green Taxonomy and supporting consumers, businesses, and investors in making
sustainable financial decisions.
Sovereign Green Market Pioneer: The Climate Bonds Initiative has granted the UK government two awards in recognition of its work as a global pioneer in green finance in 2021: the Largest Green Sovereign Bond and Sovereign Green Market Pioneer.
Roadmap on Greening Finance: The roadmap on Greening Finance outlines the government’s long-term goals for greening the financial sector and bringing it in line with the UK’s commitment to meeting its net zero target. The Roadmap focuses on three main areas:
informing (ensuring that there is data available that can be used to support sustainable decision-making), acting (policies or legislation that are enacted support taking the environment and climate change into account), and shifting (to net-zero and nature-positive economy).
Net Zero Strategy defines the policies and proposals the UK will undertake to cut greenhouse gas domestic carbon emissions by 100% by 2050 compared to 1990 levels. The strategy highlights green opportunities, and sets out plans to enhance private investment
flows to support meeting the UK’s net zero targets.
UK Centre for Greening Finance and Investment (CGFI) has a mandate to accelerate and support financial institutions around the world to adopt and utilise environmental and climate data and analytics. Through its activities, CGFI will open doors for the UK
to take the lead in financing green and greening finance.
Dasgupta Review the independent review covers the research undertaken by Professor Sir Partha Dasgupta, highlighting the relationship between biodiversity and economics. The report claims that to protect and enhance prosperity and the natural world, we must
change the way we think, act, and measure economic success. The UK Government used the findings of the review to shape some of its ambitions for its COP26 and G7 presidencies.
COP26: The UK held the COP26 Presidency, with the principal aim of limiting the rise in global temperature to 1.5°C. The UK aimed to deliver this aim via the Glasgow Climate Pact, which they successfully achieved. A historic surge in the number of companies,
regions, and investors seeking to align with climate and environmental goals was triggered by the UK’s COP26 Presidency in 2021. National net zero targets already encompass more than 90% of global GDP.
2022
UK Transition Plan Taskforce (TPT), aimed to develop a gold standard for private sector climate transition plans applicable to the UK.
2023
Update of the Green Finance Strategy: The strategy highlights the aim of the government to harmonise with international frameworks and reaffirms its commitment to the green agenda. Firms’ transition plans and UK Green Taxonomy are the main priorities for
2023.
Today, fintech firms and their customers are demanding products and services that consider sustainability across the environment, social issues and governance. However, climate change is one of the most pressing challenges of our time.
Although the fintech industry is built on the basis of positive change, it is evident that not enough is being done to drive sustainable finance and by 2035, it will be too late for the sector to start carving out a space for ESG.
Mitigating climate change, keeping the global temperature rise to below 2°C above pre-industrial levels, and working towards the Paris Agreement to achieve carbon neutrality by 2050 is of paramount importance.
The time is now because the consequences of not taking action are dire:
- Biodiversity loss,
- Sea levels rising,
- Weather patterns becoming extreme, and
- Economic challenges.
2021 was a pivotal year for driving positive change in the UK with the COP26 climate summit in Glasgow dedicating a specific day to international climate finance for the first time. According to the UK Government: “We cannot deny that the finance industry
plays a significant role in shaping our world, with sectors like banking, payments, insurance, bonds, and funds tying almost all countries together in our global economy. The finance industry thus has a tremendous responsibility to lead a just transition to
a sustainable economy. Any push for sustainable finance will have a ripple effect, with other industries following suit by choice or necessity.”
Emma Kisby, Cogo CEO, EMEA, revealed that the most significant developments across green fintech have occurred since 2021 because of “growing pressure and increased legislation for banks and corporations to measure and report on their emissions,” as well
as increasing pressure from customers.
She also mentioned that Cogo research found that 80% of mobile banking customers want to know the carbon impact of their spend, and 24% of banking customers will switch if their bank is not doing ESG.
At COP27, the UK Transition Plan Taskforce (TPT) published their disclosure framework and implementation guidance, which aims to set the gold standard for private sector climate transition plans. While all organisations recognise the need to meet the UK’s
net zero targets, the financial sector plays a critical role in supporting this transition and therefore, allocate capital where required.
According to EY, financial institutions “are not powerless to predict how key industries will change – or to begin planning how they themselves are likely to be transformed.” EY have developed a methodology to clarify routes for decarbonisation, as indicated
below.
![](https://imgur.com/biA0VKU)
Source: EY.
2024
Climate risk management is genuinely embedded at most FIs, and mandatory transition plans are used by the industry to appraise risk with increasing sophistication.
2025
As conflicts between topics such as decarbonization and energy security have played out, the ‘supporting all through transition’ strategy starts to become more nuanced, with investors, finance providers and risk carriers starting to screen out players and
sub-sectors beyond the immediately obvious (e.g. fossil fuels).
2030
Technologies currently going through R&D processes emerge, are considered safe, and first-time financing commences (e.g. hydrogen aeroplanes, ammonia ships, etc.).
2035
Industry investing in non-core loans, investments and real assets (that don’t meet decarbonization requirements of mainstream FIs) reaches peak liquidity.
2040
Valuation differences for those with different approaches to decarbonization start to close (except for those operating at the extremes).
2045
Wind-down financing and insurance for legacy assets starts to get mothballed (e.g. financing of planes and ships built in 2022).
2050
Decarbonisation is complete, and carbon topics cease to become part of balance sheet management, rather a threshold requirement at origination.