JLL welcomes major new announcements on green finance
The UK issues its first sovereign green bonds and will introduce mandatory climate disclosure requirements
This week has seen a number of new announcements from the Chancellor of the Exchequer, Rishi Sunak, in response to the growing industry demand for investment into net zero carbon transition. The announcements, which JLL welcomes very much for the built environment, centre around green finance, with the introduction of the first sovereign green bond and a requirement for climate disclosure using the recommendations of Task Force on Climate-related Financial Disclosures (TCFD).
Firstly, the sovereign green bonds have been introduced to fund projects that will tackle climate change, finance net zero carbon infrastructure, create green jobs across this country and enable a green COVID-19 recovery. These bonds are expected to be available from 2021 and reflect a really positive step for the country, allowing the UK to follow in the footsteps of Germany and Sweden, who have similar measures in place. This incentive will create huge opportunities in particular for the real estate industry and will hopefully lead to an exciting flurry of private investment into projects that are hard to finance at the moment, particularly the upgrade of existing residential and commercial buildings.
The measures will make the UK the first country in the world to make climate risk disclosures obligatory
At JLL, we have a strong track record of working with both borrowers and financial institutions that offer green finance solutions, working with the latter to develop green lending products. These new announcements will enable our debt advisory team to explore further opportunities for our clients.
The chancellor also announced that from 2023, all publicly listed UK companies with a premium listing will be required to “comply or explain” with the TCFD requirements. Following this, rules will be tightened and extended further in 2025, subject to consultation. These measures will make the UK the first country in the world to make climate risk disclosures obligatory and will put the spotlight on businesses to move sustainability higher up their agenda and treat it with importance.
Clearly the TCFD recognises that implementing their recommendations takes time, and that it is a journey to proactive and robust climate risk management. McKinsey estimates that circa15% of EU bank balance-sheets are at risk from climate change therefore both private and listed organisations have already started voicing their commitment to measuring and reporting their respective climate risks to key stakeholders. Moving forward, businesses will need to continue these TCFD reporting commitments, but more importantly will be required to act decisively to protect asset value – a clear example of both the carrot and stick at work.
These announcements made by the chancellor mean that businesses are being held accountable and they are testament to the importance of sustainability to investors. We hope to see even more measures and legislation being implemented over the next few years and look forward to working with our clients and partners to ensure that we can protect our environment, and that real estate can play its part.