New £10m research centre for greener global finance

The UK is investing £10 million in a new national green finance research centre that will advise lenders, investors and insurers.

The research centre will enable them to make environmentally sustainable decisions, and support a greener global economy.

Access to scientifically-robust data and analytics is currently patchy and unreliable. Armed with better information, underpinned by innovative UK science, financial institutions around the world will be much better placed to make decisions that contribute to a more sustainable planet.

This will help financial institutions shift money away from risky activities that harm the environment, such as coal-fired power and deforestation, and towards activities that are less harmful, such as renewable power and sustainable agriculture.

The UK Centre for Greening Finance and Investment (CGFI) will be funded by UK Research and Innovation (UKRI) and led by the University of Oxford.

New physical hubs in Leeds and London will support companies and start-ups commercialise products that can green global finance, including tools that measure storm and flood risk facing properties or the pollution created by companies and the liabilities that result.

Having a hub in Leeds will enable the consortium to reach different parts of the finance industry outside London, but where the adoption of climate and environmental risk analytics will be key to achieving the Government’s targets for achieving net-zero.

PROFESSOR IAIN CLACHER, LEEDS UNIVERSITY BUSINESS SCHOOL

The centre will work with finance professions, such as the Chartered Bankers Institute and Chartered Financial Analysts UK, to ensure that every professional financial decision takes climate change into account.

Other institutions will form part of the new national centre, including the Universities of Bristol, Leeds, Reading, and Imperial College London, as well as The Alan Turing Institute and the Satellite Applications Catapult, and the Science and Technology Facilities Council. In the summer a full range of financial institution and corporate partnerships will be announced.

Work will begin in April, ahead of this year’s COP26 UN climate summit in Glasgow. The CGFI will deliver on commitments made in the UK Government’s 2019 Green Finance Strategy, and the announcement signals the UK’s commitment to using its global finance sector to support the transition to a net zero carbon and nature positive future.

Energy and Clean Growth Minister Anne-Marie Trevelyan said: “Climate change is the biggest issue that we need to tackle to protect our planet for our children and grandchildren. While the Government has invested billions of pounds so we can end the UK’s contribution to climate change, we will not reach our net zero target without mobilising private capital and unleashing the power of the free market.

“The UK Centre for Greening Finance and Investment in London and Leeds will encourage financial services to turn the tide of their investments and focus on sectors and companies that have a smaller environmental footprint. Doing so will support industries and businesses to develop clean green innovations, creating thousands of jobs across the country – ensuring we build back greener.”

Economic Secretary to the Treasury and City Minister John Glen said: “We’ve set the ambition for net zero – now we must ensure our financial sector has the tools and information to get behind the transition. We’re already improving the climate data available by mandating TCFD-aligned* disclosures across the economy and implementing a green taxonomy.

“This new centre will advance the UK’s leadership in green finance and bring forward the day when firms can access environmental data and analytics for every place on Earth, past, present and future.”

The Bank of England’s executive sponsor for work on climate change Sarah Breedan said: "Integrating climate and environmental data and analytics into decision making will allow financial institutions to identify, measure and manage the financial risks and opportunities from climate change, and so support the Bank’s objective to ensure the financial system is resilient to these risks and supportive of the transition to net zero.

“The Bank of England is delighted that the CGFI will support firms’ efforts in this important area, including for the forthcoming Climate Biennial Exploratory Scenario.”

William Russell, Lord Mayor of the City of London said: “As we look to build a more resilient post-pandemic global economy, it’s clear that it must also be a more sustainable one. The demand across the sector for deep expertise in the green finance space – such as that which will be provided by the CGFI - demonstrates that the UK is well-placed to take advantage of this opportunity. I’m therefore delighted that the CGFI will introduce a new layer of innovation to the City of London in sustainable finance.”

Professor Sir Duncan Wingham, Executive Chair of the Natural Environment Research Council, part of UKRI, said: “Good data and analytics - based on the best science - is fundamental to understanding and managing climate and enivironmental risk exposure in support of the transition to a more sustainable global finance system.

“This investment by NERC and Innovate UK will enable improved access to, and understanding of, physical and transition climate and environmental risks as they impact both sides of the balance sheet. It will help the finance sector to support delivery of a low carbon economy and the recovery and restoration of our natural environments.”

Dr Ben Caldecott, Director and Principal Investigator of CGFI and the Lombard Odier Associate Professor of Sustainable Finance at the University of Oxford, said: “CGFI will allow financial institutions to access scientifically robust climate and environmental data for any point on planet earth now and projected into the future, and for every major sector of the global economy. Doing so will create public goods and unlock innovation. The UK is perfectly placed to transform the availability of climate and environmental data in finance. We have world-leading capabilities in all the various areas that need to come together to solve the problem.”

“The market for ESG data, of which climate and environmental data is a large part, is expected to reach US$1bn in 2021 and grow annually by 20%. It is our view that this is actually a significant underestimate of future growth potential. The CGFI will support enterprises providing climate and environmental analytics and realise the opportunity for UK plc of being a world-leader in commercialising products that can green global finance.”

The University of Leeds’s contribution to the project will be led by Professor Iain Clacher of Leeds University Business School and Professor Jason Lowe of the Priestley International Centre for Climate.

Professor Clacher said: “Working across the consortium we will take the best in climate science and environmental risk analytics and accelerate the adoption and use of these throughout the financial sector, helping to guide trillions of pounds of investments.

“Having a hub in Leeds will also enable the consortium to reach different parts of the finance industry that sit outside of London, but where the adoption of climate and environmental risk analytics will be key to achieving the government’s targets for achieving net-zero.”

Funding for the CGFI was allocated by UKRI through the Natural Environment Research Council (NERC) and Innovate UK.

*Task Force on Climate-related Financial Disclosures.

Further information

For media enquiries, contact Sophie Docker, Senior Media and Communications Manager, UKRI, via 07513 485 076 or

sophie.docker@ukri.org.

Dr Ben Caldecott is available for interview. Contact: ben.caldecott@smithschool.ox.ac.uk or news.office@admin.ox.ac.uk

Image by Ahmad Ardity from Pixabay

About the UK Centre for Greening Finance and Investment

Funding for the CGFI was allocated through the Climate and Environmental Risk for Resilient Finance programme launched by the Natural Environment Research Council (NERC) and Innovate UK in February 2020.

The CGFI is the UK national centre established to accelerate the adoption and use of climate and environmental data and analytics by financial institutions. It will unlock opportunities for the UK to lead internationally in greening finance and financing green.

A consortium of major UK institutions, led by the University of Oxford, and including the Universities of Bristol, Leeds, Reading, and Imperial College, as well as The Alan Turing Institute and the Satellite Applications Catapult, and the Science and Technology Facilities Council, will form the nucleus of the new centre.

To achieve this exciting vision, the CGFI consortium brings together a world-leading, multidisciplinary team. The senior leadership team are all globally recognised experts in their respective fields with a track record of delivering high-impact research, tools, analytics, and information relevant to a range of financial institution needs.

Five major UK universities plus a range of partner institutions reflects our strategy to bring together the diverse range of expertise, across climate and environmental risks, disciplines, financial institutions, and geographies, required both to meet the needs of financial institutions now and to create the strong, broad foundation necessary to scale-up the envisioned world-leading national centre for the long-term.

Our broad base of expertise includes climate, earth systems and environmental science, geography, computing, data science, mathematics, water, engineering, systems science, statistics, economics, business, innovation, decision science, and finance, and our team includes both career researchers and those with practitioner backgrounds.

Full list of consortium members:

University of Oxford