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The road to Net-Zero Finance (Sixth Carbon Budget Advisory Group)

1. Outline

The Road to Net-Zero critically assesses the UK financial system’s ability to deliver a Net Zero target. The report comprises independent advice of a panel of experts from world-leading financial institutions to the Climate Change Committee to accompany its Sixth Carbon Budget.

2. Key recommendations to the Committee

Alongside outlining principles for finance to achieve Net Zero, the report explicitly recommends:

  • Strategic recommendations. The UK should commit to be the world’s first net-zero financial system. It should focus on making net-zero projects and plans investable. All net-zero policies should be designed so that investments are resilient, fair and enable local action.
  • Private finance recommendations. The UK should publish both sector-specific strategies and system wide instruments to enable market innovation. Climate skills and knowledge of the UK’s financial practitioners should be deepened. The literacy, expertise and confidence of the end users of financial services should be built to increase demand for climate-aligned products.
  • Financial regulation recommendations. The UK should fully integrate climate risk and net-zero into financial regulation and monetary policy. Net-zero targets should be made mandatory for financial institutions. Investor stewardship should be extended to incorporate achievement of net-zero. Clear metrics are needed for the net-zero transition at an institutional and investment level.
  • Public finance recommendations. The post-COVID-19 recovery plan should be used to fast track climate investment, reset fiscal investment and connect public debt with climate goals. Net-zero and sustainability goals should be set for existing public financial institutions. A National Investment Bank with a clear green mandate should be established.
  • International recommendations. The UK should build the international frameworks needed that can accelerate the financing of net-zero, resilience and just transition.
  • Tracking recommendations. The UK should establish a regular assessment of investment needs and financial flows for climate action in the UK.