The UK Government is positioning the UK as a climate finance hub, announcing a new partnership with the financial sector to unlock capital from institutional investors for green technology and investments that can support development in emerging markets.
The announcement was made by the Foreign, Commonwealth & Development Office during a speech to pension funds, insurers, banks, and development finance organisations, during a market opening ceremony at the London Stock Exchange.
The government is also publishing a new report: The UK as Climate Finance Hub, which has been co-authored by Mercer, Aviva Investors and the Private Infrastructure Development Group, and supported by the Institutional Investors Group on Climate Change (IIGCC). This report looks at the challenge of scaling private capital for climate action in emerging markets, and announced a new taskforce to take its recommendations forward.
The UK minister for development Annelise Dodds said that unlocking capital for investments will help the government meets its objectives when it comes to tackling climate change and also driving growth at home.
Dodds announced up to £100m for the UK’s flagship public markets programme MOBILIST. This programme will provide businesses focused on delivering the SDGs with the anchor funding and expert advice they need to list on stock exchanges around the world, including in London, allowing them to attract significant sums of additional private investment.
This is expected to generate between £400 million and £600 million of new investments in businesses across emerging markets in Asia, Africa, and Latin America. These investments will support economic growth, sustainable development and climate action in local markets.
Dodds praised the “expertise, experience and dynamism” of the UK’s financial services sector, and pledged to put this expertise “at the heart of how we meet the opportunities and challenges of our time”, including accelerating delivery of the UN’s Sustainable Development Goals (SDGs). These seek to address global challenges, including poverty, inequality, and climate change, to achieve a better and more sustainable future for all, by 2030.
Dodds said: “With businesses and the government working hand in hand to drive investment in the Global South, we can unlock growth, jobs, trade, investment, and pride in our economy overseas and here at home.
“This government is enabling the financial services sector to flourish and use its expertise and depth of capital to invest in the markets and technologies of the future. Through partnerships like this, we will deliver on the Plan for Change, drive domestic growth, and create a world free from poverty on a liveable planet.”
Mercer’s UK president and CEO Benoit Hudon says: “UK institutional investors, as part of the wider financial and professional services ecosystem are uniquely placed to help finance development projects in emerging markets and developing economies, which will also support UK growth. The report published today, co-led by Mercer, sets out a range of measures the UK Government and finance industry can take to secure the UK’s position as the world’s leading destination for transition finance.”
Dodds also marked the issuance of the first Climate Investment Fund (CIF) Capital Markets Mechanism (CCMM) bond last month, which raised $500 million for energy and clean technology projects in low- and middle-income countries. The CCMM, launched by the Prime Minister at COP29, is a new financial mechanism to leverage future loan repayments by issuing bonds on capital markets.
The speech comes a week after British International Investment (BII), which is funded by the FCDO, launched a call for institutional investors to work with them to develop solutions that will boost the flow of private capital into emerging markets, which are often considered too risky by global investors, but can offer attractive investment opportunities for growth, diversification and impact for the climate transition.
The London Stock Exchange CEO Julia Hoggett adds: “Flows of investment are vital to generating sustainable growth both in the UK and around the world. London’s capital markets have long played a leading role in driving flows of capital to where they need to go, and we welcome the focus on fuelling growth and supporting the just transition to net zero.
As part of these efforts, we are proud to celebrate the listing of the Climate Investment Funds’ Capital Markets Mechanism on the London Stock Exchange. This pioneering bond issuance programme not only brings a new financing tool to our market but is facilitating critical investment in sustainable and clean assets.”
UK Climate Minister Kerry McCarthy adds: “This is a historic moment for tackling the climate crisis, with the first bond raising $500 million to accelerate the global clean energy transition and support the flow of climate finance to developing countries.
“Public finance alone cannot tackle the scale of this challenge, and this mechanism will help leverage the private finance needed to support those on the frontline of a changing climate.
“Its listing in the UK positions London as a green finance capital. By working with partners such as the World Bank the UK can drive the action needed to grow the economy and reap the rewards of net zero.”
