Sustainable Finance and Green Innovation

Reported by Kate McNeil, CSaP Communications Coordinator

According to Christian Deseglise, Head of Sustainable Finance at HSBC and an Adjunct Professor at Columbia University, covid-19 has changed companies' and investors' perceptions of sustainability issues. In the fourth episode of our series on science, policy and a green recovery, Dr Rob Doubleday sat down with Mr Desglise and Cambridge University Department of Politics lecturer Dr Cristina Peñasco to discuss how the finance sector might play a role in a green recovery, and to explore the role of innovation, research and development in the UK's transition to a net zero economy.

You can listen to the episode here:

What role can sustainable finance play in the transition to a net zero?

According to Christian Deseglise, the covid-19 pandemic has accelerated trends that those working in sustainable finance were already seeing. Increasingly, investors are asking questions about the resilience of their businesses and supply chains, and about energy efficiency, sustainability, and social issues. He suggests that covid-19 has changed investors' perceptions of sustainability issues, and that moreover, the pandemic is increasingly viewed within the sector as a foretaste of worse things to come if we fail to protect our environment and biodiversity.

While there have been innovations within the finance sector which aim to support sustainable growth, such as green bonds, Mr Deseglise suggests that getting to a net zero economy will require support from policymakers to accelerate and standardize the transition. He suggests that measures such as carbon pricing and legislating on net zero as the European Union has done are powerful steps which can make it easier for banks and businesses to adjust their behaviour. Moreover, he suggests that encouraging climate stress tests which integrate climate risk into lending; pressure from policymakers, regulations, students and customers; finding roles for the private sector in areas such as blended finance mechanisms, and finding solutions to finance sustainable infrastructure in emerging markets are all necessary parts of transitioning the financial sector and achieving net zero.

How can we support research and development while decarbonising the economy?

While Dr Cristina Peñasco believes that it is unlikely that the UK will become a global R&D leader, she believes we are in a position from which we can lead the debate on climate goals and developing the targets and standards to undergo systems transition while undertaking steps to improve our economy more generally. Noting that R&D is only one piece of a larger puzzle, Dr Peñasco suggested that while R&D policies can have an impact in the longer term, in the short term we need to focus on policy instruments for a low carbon transition by fostering environmental, technological competitiveness, and social outcomes. Within this, R&D funding schemes can help foster competitiveness. Meanwhile, green public procurement, and measures which complement R&D by promoting innovation and competitiveness in small firms in local communities, are other aspects of the way forward.