Financing low-carbon growth and innovation in the UK Industrial Strategy


This policy brief outlines how the public sector can crowd in private finance to support low-carbon growth and innovation in the UK government’s Industrial Strategy.

Headline issues

  • Funding the UK’s Industrial Strategy will require mobilising large amounts of private sector funding for infrastructure and emerging technologies.
  • To be future-proof, that infrastructure and technological development must be aligned with the government’s strategy for a low-carbon transition.
  • This will require clear and forward-looking policy to encourage long-term funding in sustainable infrastructure and emerging clean technologies from private equity firms, institutional investors, and capital markets.

Recommendations

There are four areas the government can focus on to encourage long-term private sector investment in low-carbon growth and innovation:

  1. The Industrial Strategy needs to be supported by a trusted framework of climate policy fundamentals, in particular energy efficiency, transport beyond 2020, carbon capture and storage, and mature low-carbon energy generation.
  2. To maintain investment from the private sector in low-carbon infrastructure and strategic sectors, the government must develop a contingency plan to safeguard the role the European Investment Bank and Green Investment Bank have played in providing direct financing and credit enhancement, and must scale up investment to the level necessary for the low-carbon transition.
  3. To connect the UK capital markets with the Industrial Strategy, the government should encourage wider disclosure of climate-related risks and support additional issuance of bonds for renewable energy and other low-carbon projects.
  4. The government should consider developing an overall strategy for green finance, to be overseen by BEIS or Her Majesty’s Treasury.

 

The analysis in this brief builds on discussions from an ESRC-sponsored workshop on how the UK can mobilise green finance for the Industrial Strategy. Held in London in March 2017, the workshop was attended by government and business stakeholders.