Thread by @BDavisBriz

Looking forward to an august panel discussion on how the economy can be reshaped to help better deliver on our #NetZero and #LevellingUp agendas #NEFBriefing

https://twitter.com/NEF/status/1499361217789497345

.@Miatsf opens the panel by welcoming the progress that has been made to date in getting finance more interested in #NetZero & #LevellingUp, but there is still progress to be made - for example, low levels of investment in #SMEs despite them being drivers of growth #NEFBriefing

First speaker @JosephEStiglitz discusses how to use the credit system to accelerate a green transition. Says historically financial institutions have made "strong statements" about wanting a green portfolio, but critics fear this may just be "greenwashing" #NEFBriefing

Stiglitz gives the example of a financial company which proudly announced that it was switching to green lightbulbs in its offices, while still investing in the oil & coal industries #NEFBriefing

Stiglitz argues that capital is vital for a green transition. Says that investments need to now consider social costs & benefits, which are currently under-considered by private investors #NEFBriefing

This is despite the fact that the financial market remains exposed to climate risk. Stiglitz highlights examples of real estate being at increased risks to flood & wildfires, which has yet to be repriced into asset prices #NEFBriefing

Stiglitz also discusses "transitional risk". Believes that assets in fossil fuels will eventually become low/no-value assets, which will have a significant impact on global financial & economic systems #NEFBriefing

In both cases, there will need to be a significant repricing. Stiglitz believes that Govts will bailout investors and companies, which will "socialise the risk", meaning ordinary people will be disproportionately hit by the financial impact #NEFBriefing

Stiglitz argues that we need to get better at financial systems truly reflect the social costs and benefits of investments. The first tool we can use is improving the information available to investors on costs & benefits #NEFBriefing

Stiglitz also argues that central banks need to move away from short-termism. #ClimateChange may seem like a "long term" phenomenon, but the impacts are here today. Similarly, most investments are long-term, so mispricing will inevitably become clear #NEFBriefing

Stiglitz says that proper pricing will require "all the tools at our disposal" - be it carbon pricing, regulating financial institutions to adopt a long-term approach to risk analysis and altering corporate governance #NEFBriefing

On #Mortgage reform, Stiglitz argues we need to step away from government-backed schemes. Instead, the government should only support "green mortgages", which take into account the environmental impact of housing #NEFBriefing

Stiglitz also calls for the rollout of a network of public Green Banks, which allows for an increased flow of credit towards projects that support a green transition #NEFBriefing

In conclusion, Stiglitz says that market failures are "pervasive" in the green transition. It is therefore vital that government action is needed to facilitate a rapid and effective green transition #NEFBriefing

Next, @bankofengland's Chris Faint opens by repeating that we are in "a race against time" towards the green transition. Notes it has been 7 years since BofE began working on #ClimateChange. Is currently working on a framework for understanding climate-related risks #NEFBriefing

Faint welcomes the fact that banks are progressing on their own Net Zero strategies, and the work of the public and other stakeholders in holding them to account #NEFBriefing

Faint says that, while everyone has a role to play, different groups have different roles to play. As a Central Bank, this role includes regulation and co-ordination #NEFBriefing

However, Faint says we must be wary of unintended consequences. For example, Faint argues that a drive to "greening now" may lead firms that require more intensive decarbonisation over a longer period to struggle to gain finance #NEFBriefing

Faint also warns that increased competition over limited green financial instruments could result in green financial bubbles, or encourage "greenwashing", which would undermine greening initiatives #NEFBriefing

On how to ensure a successful transition, Faint says we need to aid firms to transition away from assets that are "dirty today" towards assets that will be "green tomorrow". In particular, finance needs to support innovation to encourage decarbonisation #NEFBriefing

With government policy lagging behind the markets, Faint says we need to ensure incentive structures are built in the right way. In particular, Faint welcomes moves towards improving transparency and developing common transition plans #NEFBriefing

Faint concludes by saying that there is appetite amongst investors for the green transition. However, regulators and policymakers need to be wary of the unintended consequences & risks, and provide appropriate support & policies #NEFBriefing

Next speaker @Frank_vanlerven gives an overview of the initiatives that has been made at greening finance. However, van Lerven notes that we need to move away from engagement to concrete actions #NEFBriefing

Van Lerven notes that there is currently an over-investment in "dirty" industries and an under-investment in "green" industries. He also notes that our current finance system is not geared for strategic capital - with only up to 5% investments going to SMEs #NEFBriefing

On policy approach, van Lerven says that there is currently an inconsistent approach to #NetZero & #LevellingUp, with an over-reliance on deregulation, rather than incentivisation #NEFBriefing

To change this, van Lerven argues we need:
1. Clear targets for measuring success
2. Establishing a Green Term Funding Scheme to provide cheap loans for green lending
3. Introduce a Green Capital Requirement to help disincentivise "dirty lending"
#NEFBriefing

However, van Lerven notes that Central Banks cannot do this alone. Government needs to make itself "more vocal and more credible" in terms of introducing green investment strategies & introduce clear penalties for dirty investments #NEFBriefing

Next speaker @kevinhollinrake opens his presentation by arguing that the UK is objectively a "world leader" in climate change & a potential future leader in the nascent Green Finance sector #NEFBriefing

However, Hollinrake is concerned that we are increasingly looking for "one sector to save the world". Argues that financial sector is there to provide finance, businesses are there to innovate, Govt is there to regulate #NEFBriefing

For example, by forcing Banks to divest entirely from "dirty" industries could mean that the very sectors which could provide the solutions we need to tackle the problems. Calls for a measured "signposted" approach to divestment #NEFBriefing

On SMEs, Hollinrake says that there is a huge amount of work still to do from the 2008 crash, where otherwise perfectly viable SMEs went bust due to lack of finance. This has negatively impacted on people & communities in left behind areas #NEFBriefing

Hollinrake is concerned that a "scorecard approach" to SME financing will lock out businesses that are being innovative and making meaningful steps towards climate change - this will hinder our approach to both Net Zero & Levelling Up #NEFBriefing

Hollinrake also warns we need to be wary of greenwashing. In particular, the "outsourcing of emissions", where companies import materials from countries with lower environmental standards, creating a "false economy" #NEFBriefing

Finallly, Hollinrake also calls for a more long-term approach to govt financial support - giving the example of the Green Homes Grant, which was too short-term to allow businesses to invest in the equipment & skills needed for a meaningful transition #NEFBriefing

Hollinrake concludes by repeating that we need to ensure that our move to a green transition does not lock out those industries, sectors and people that can provide the innovation we need to achieve them #NEFBriefing

Next speaker @rushanaraali highlights the importance of civil society in moving the green agenda forward - paying particular tribute to the fact that young people are getting increasingly involved in the green debate #NEFBriefing

Ali describes the 2010s as a "lost decade" for the green transition - saying the UK had been "rocked by the crises" of austerity, #Brexit & #Coronavirus - argues that we need to learn the lessons of these crises to inform our green transition #NEFBriefing

Ali agrees with Hollinrake that Govt grants have so far been too piecemeal and short-term. Says that Govts of all political colours have introduced green policies, there needs to be a longer term strategy for delivering on #NetZero. #NEFBriefing

Turning to financial investment, Ali argues that while the amount invested has been huge, this is down to only 5 banks. Ali says that while banks cannot solve the climate crisis, Govt must do better at stopping them from fuelling the crisis through dirty investment #NEFBriefing

Ali also calls for greater govt investment in the green agenda. In particular, the UK's overseas commitments need to support developing countries to green transitions that is done in a just & sustainable way #NEFBriefing

On the other side of the coin, Ali says that the government should also take a firmer stance against countries that are the biggest polluters #NEFBriefing

Ali also calls for greater attention given towards biodiversity and our natural assets. In particular, the govt should support NGOs "on the ground" in their work #NEFBriefing

In conclusion, Ali welcomes the work the @CommonsTreasury has done in mainstreaming green investment in the UK political debate. Believes the UK is uniquely placed to reap the benefits of a green transition, but only if the political will is there #NEFBriefing

Ali also argues that #LevellingUp will not be achieved without a #JustTransition. Says it is important that "those with the broadest shoulders" take their fair share of the costs involved to support left behind groups & communities in their green transition #NEFBriefing

Final speaker @ericlonners says there has been "a profound and encouraging" change across Europe towards green investments. However, at the same time, there is a "noticeable lack of clarity" around the overall aims of policies & what we want to achieve #NEFBriefing

Lonergan says this lack of direction is particularly important for the financial sector. Once the govt provides a strategic direction, Lonergan argues that it will make targeted investments #NEFBriefing

Firstly, Lonergan says we need to increase the maximum amount of energy generated by renewables, while at the same time taking as much of our transport & industry as possible "off the grid" #NEFBriefing

If we achieve this, Lonergan says that we would reduce up to 75% in our current emissions. Argues that we are the generation with the lowest cost of capital & that investment in renewables has short lead times (eg tidal power in UK was achieved within 5 years) #NEFBriefing

Lonergan calls for concerted policy efforts to collapse the cost of capital in energy generation, and increase investments in renewables. Argues that finance has a pivotal role to play in this, with the right incentives #NEFBriefing

Lonergan gives the example of de-risking energy prices. Says that Government has a role to play in incentivising investment in renewables and low-carbon energy generation #NEFBriefing

Looking at the 🇳🇴example, Lonergan says that they have managed to encourage the uptake of EVs not through carbon taxes, but by incentivising adoption of greener models - this includes investment in charging points, lowering costs of EVs & lowering road tax & tolls #NEFBriefing

Lonergan says the UK govt should do this with a sector-by-sector approach. This could include corporation tax holidays, subsidies for using particular products/services & raising taxes on carbon-intensive alternatives to make "green" products more attractive #NEFBriefing

In conclusion, Lonergan calls on the government to shift policy incentives towards "the good actors" across all of our economies #NEFBriefing

The webinar now moves to a Q&A session #NEFBriefing

First Q is at Lonergan on who would decide what incentives work for which sectors. Lonergan says we know what sectors are the heaviest polluters. Says we need to prioritise areas where we need the most change (eg Steel, Cement, Food & Agriculture) #NEFBriefing

On a Q about financial risks, both van Lerven & Lonergan believe that the "doommongering" over how pension pots & other investment portfolios is "overstated". Believes that a green transition will provide new profitable investment opportunities #NEFBriefing

Final Q is on government scrutiny. Ali believes Select Committees will work collaboratively to hold government to account - in particular, she believes that the Treasury Committee and Business, Energy & Industrial Strategy will work close together #NEFBriefing

However, believes that getting rid of the Energy & Climate Change Committee when DECC merged with BEIS was "a mistake" as issues could get "lost in the noise" #NEFBriefing

Great debate on the changes needed to ensure finance better supports #NetZero & #LevellingUp. Thanks to @JosephEStiglitz @Miatsf @kevinhollinrake @rushanaraali @ericlonners @Frank_vanlerven & Chris Faint for your insights, to @Vibeka for chairing & @NEF for hosting! #NEFBriefing