The Environmental Audit Committee is today launching a new inquiry into Green Finance. This inquiry follows on from the Committee’s previous inquiries on a green economy, environmental taxes and environmental aspects of Autumn Statement 2012. The Committee held a joint seminar with the City of London on green finance to help scope this inquiry. A transcript ( PDF 584 KB) of that seminar is available from the Committee’s website.
The Committee will be examining:
(i) What are the main drivers behind institutional investors’ decisions on the type of investments they include in their portfolios? Where they contemplate supporting energy or environmental projects, what relative weights do they give to questions of possible financial return, environmental/carbon impact, energy security, or other factors?
(ii) How effective are the financial markets in matching available finance to the required investment in renewable energy and other green projects? To what extent is a potential “carbon bubble” a real risk?
(iii) What should the Government be doing to help redirect finance to help fill the £-multi-billion green finance gap? This includes:–
- How can ‘political risk’ to investors from changes to the Government’s energy and environmental policies be reduced? Can the Government ever remove political risk or are more innovative financial instruments that offset those risks the solution?
- Is greater direction to banks needed to encourage them to increase their lending to renewable energy and green projects?
- How can pension funds and other investors be encouraged to re-direct their capital funds towards investments with green objectives
- Are fiscal incentives for people/institutions to put funds in green investments needed, and if so what?
- How can better information on the environmental impacts of investments and companies be provided to investors? What difference would such information make to investors in practice?
- What are the pros and cons of having a financial transaction tax (Tobin tax) with revenue hypothecated to support green investments ?
(iv) What can the Government do to help increase the flow of finance to small and community-based renewable energy and green projects?;
(v) What impact is the Green Investment Bank likely to have on the green finance gap? Does it have the right investment strategy?; and
(vi) How should progress against that green finance requirement be monitored? While the Committee on Climate Change monitor progress on emissions reduction via the Carbon
Budgets, and the Office for Budget Responsibility monitors progress on Government debt reduction, who should monitors progress on delivering the necessary green finance?
As part of this inquiry the Committee will also be visiting the Green Investment Bank’s Edinburgh Headquarters in September to question the Bank’s senior executives on its first year of operations. The Committee undertook an inquiry in 2011 on how the Bank should be designed. The Committee is inviting written evidence on these issues by 18 July, although later submissions may be accepted. More wide ranging responses are also welcome.
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