UK to launch first green gilt in 2021

UK to launch first green gilt in 2021
Rishi Sunak, chancellor of the exchequer. Credit: Toby Melville.

Rishi Sunak has pledged to launch Britain’s first “green sovereign bond” next year as he laid out plans for a green, post-Brexit financial services world.

Speaking yesterday (November 9) in the House of Commons, the chancellor of the exchequer said the government would issue its first ever green gilt next year to “meet growing investor demand”.

He said it would be the first in a series of new issuances as the government looked to build out a “green curve” over the coming years.

The money raised by the bonds will be used to help fund projects to tackle climate change, build infrastructure investment and create “green jobs” across the country.

Such gilts are already used in countries around the world, including Germany and Sweden.

Mr Sunak also set out a roadmap that by 2025, large companies and financial institutions in the UK would be mandated to disclose the threats to their business from climate change.

He said: “[We are] going further than recommended by the taskforce of climate-related financial disclosures. And the first G20 country to do so.”

In a bid to help firms and investors understand the impact of their investments on the environment, Mr Sunak said the government would implement a new ‘green taxonomy’ — something the industry has long called for in the environmental, social and governance investing world — that would robustly classify what is meant by ‘green’.

Outside of the ‘green’ theme, Mr Sunak said he wanted to shake up the listing process in the UK in a bid to boost the number of companies who wanted to list in London, primarily to encourage more fast-growing technology firms to float on the LSE.

Within a year, the chancellor pledged to launch the UK’s first long-term asset fund — a new open-ended investment structure designed to accommodate investment in illiquid and unquoted assets — to encourage pension funds to funnel capital towards the UK’s “economic recovery”.

Mr Sunak also said the government would shortly publish a consultation on reforming the UK’s regime for investment funds.

Chris Cummings, chief executive of the Investment Association, said: “This is welcome news from the Chancellor. 

“Financial services will be critical in driving the economy to net zero, and the launch of the UK’s first Sovereign Green Bond, combined with plans to make climate disclosure mandatory by 2025, are important and ambitious steps as we seek to build a more resilient and sustainable financial system.”

Mr Cummings added that he was “pleased” to see the chancellor back the IA’s proposal for the long-term asset fund, which would “allow people to invest in more illiquid assets like infrastructure and support future economic growth across the UK”.

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