Making London a global hub for green finance

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IT IS over a year since I contributed to this column, writing about London Stock Exchange Group’s work in supporting emerging market stock exchanges and in doing so, helping to boost trade between the UK and the world’s fast growing economies.

Over the past 12 months, in particular, our relationship with the world’s largest emerging economy, China, has continued to strengthen.

The visit of Chinese President Xi Jinping dominated the headlines last month, emphasising the UK’s enthusiasm to forge closer business ties with the country. Over £30bn in trade deals were signed between the two countries.

But a green theme also ran alongside the President’s visit.

The Chinese government has ambitious plans to implement sustainable and green growth strategies, part of the UN Sustainable Stock Exchange Initiative.

This is a key area of focus not only for China but for London Stock Exchange Group too.

We are keen to develop London into a key international hub for green finance.

Two emergent global trends have put the green topic firmly on the agenda.

The first has been the identification by the Chinese government of sustainable and green growth as a top priority.

China is already the world’s largest clean technology investor, and the People’s Bank of China has developed detailed proposals to address China’s green financing needs.

In a ground-breaking report published this April, the PBoC set out in specific and practical terms, an ambitious agenda for how China can green its rapidly developing financial and capital markets.

In the report, Pan Gongsheng, the deputy governor, stated very clearly that an international approach would be the only way to bridge the gap in China’s capacity to self-finance green projects.

In particular he called on China to broaden its horizons, drawing upon the successful experiences of other countries, and to collaborate with the international community to promote the concept of green finance.

The need to seek international support is clear to the Chinese government, which itself has stated that the government can only be expected to contribute around 10 to 15 per cent of all green investment, while private capital will need to contribute the remaining 85 to 90 per cent.

The policy is already being put into action.

During the President’s UK visit, the chairman of Agricultural Bank of China (ABC), one of China’s largest lenders, stood on the balcony of London Stock Exchange to open trading, celebrating ABC’s landmark listing of Renminbi and dollar denominated Green bonds with a total value of $1bn.

The need for so called green capital is pressing.

The UN Environment Programme reports that only a fraction of global financial assets of $305 trillion have been ‘greened’ and the United Nations Conference on Trade and Development has concluded that there is a US$2.5 trillion annual investment gap in what is needed to achieve the developing world’s Sustainable Development Goals.

The UK has a vitally important role to play in this global, era-defining project and we are already making progress.

Indeed, ABC’s listing comes just three months after the launch of a range of new segments on our fixed income markets dedicated to the issuance of green bonds.

With the strong support of the UK Government; Harriet Baldwin, MP, Economic Secretary to the Treasury attended ABC’s market open ceremony, the UK and the City is in prime position to take the same global lead we have done for hundreds of years: providing finance for the next big challenge facing the world and ensuring that Britain remains open for business with the fastest growing global economies.