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Summary
- The UK government announced a £10-million fund for green finance research hubs in London and Leeds.
- The news comes ahead of UK’s turn to host the COP26 UN climate summit and the Bank of England’s first climate stress test.
- Green finance data market size is expected to reach US $1 billion in 2021 and have an annual growth rate of 20 per cent subsequently.
The UK government has announced a £10-million climate capital investment for green finance research hubs in London and Leeds. The news comes ahead of the COP26 UN climate talks which will be hosted by the UK later this year. Besides, the Bank of England is also slated to conduct its first ever climate stress test this year.
Climate change and finance capital
The UK Centre for Greening Finance and Investment (CGFI) is a joint initiative with the University of Oxford, University of Leeds, Imperial College London, and other UK institutes . The centre will be funded by the UK Research and Innovation (UKRI) and the research hubs will be launched in April.
The move aims to capitalise on the UK hosting the climate summit in November and in leveraging the city’s financial resources to become the world’s leading green finance capital.
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The research centre aims to provide easy access to scientifically robust and detailed data and analytics for investors and other financial institutions. This will allow institutional investors to assess the climate risks associated with their investments and direct funds away from harmful activities like coal-fired power and deforestation and divert them to more environment friendly investment alternatives in areas such as renewable energy and sustainable agriculture.
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It also plans to create cutting-edge new products and services to measure storm severity, flood risks and to improve investment portfolio-linked industrial pollution data.
Data challenges
The lack of access to comprehensive, reliable, and interconnected sustainable investment data prompted the creation of this hub. While pay-walled access to such data exists, it is often expensive and limited to a particular company or location. Furthermore, lack of a standardised form of reporting data and analytics make it difficult for analysts, investors, and other stakeholders alike to make informed investment decisions.
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Meanwhile, the increasing requirement for the UK companies to report their climate risks in a timely manner has led to further challenges. The central bank has asked UK-based financial companies to report how well they have tackled the climate risks associated with their portfolio investments by the end of the year.
Market Size
Dr Ben Caldecott, CGFI ‘s director and principal investigator, stated that the environmental, social and governance (ESG) data market size, is expected to reach US $1 billion in 2021 and have an annual growth rate of 20 per cent subsequently. Climate and environmental data account for a large part of ESG data.
Dr. Caldecott added this figure significantly underestimated the future growth potential of the market.
