Renewable energy was introduced to the region when it became affordable and able to compete with the primary energy sources. However, the implementation of the technology across the region still requires international investment.
The opportunity to invest has created interest from the UK’s world-leading finance sector. Canning House in collaboration with Eversheds Sutherland corporate law firm recently hosted a conference to discuss and explore how UK firms can collaborate and gain exposure to the Latin America renewable sources.
The former Mayor of the City of London and current chairman of the UK Green Finance Initiative Sir Roger Gifford presented a study sponsored by Business, Energy and Industrial Strategy and HM Treasury, that give details on how the UK can become a global leader in green finance.
The UK’s Strengths Harnessed
The study involved the input of 150 professionals spanning across 80 financial services that help the UK negotiate climate change. Insurance companies believe that the majority of corporations and governments are not prepared for climate change, due to the lack of preparation an opportunity presents itself. The UK is able to enhance its expertise in climate and environmental science to help manage the risk created for investors by global warming and produce new climate-resilient insurance products.
The main opportunity that gains the majority of interest is the funding and releasing of new technologies across Latin America with the amount being invested growing at a rapid rate. However, it is bittersweet as the development of green technology in the UK is falling. Gifford comments that the response is “to channel investment into developing innovative clean technologies. The government should set up a green investment accelerator for early-stage technology grant funding. It should also establish a dedicated public-private green venture capital fund. Finally, it can increase opportunities for green businesses through favourable public procurement policies.”
He added, “Regulators must ensure that fiduciary duty clearly states the importance of environmental and social governance (ESG) issues. A fund’s statement of investment principles must explain how social, ethical and environmental challenges are considered. Moreover, the government must ensure that investment consultants have sufficient ESG expertise. Indeed, the government and professional bodies must help educate a wider group of stakeholders about climate change.”
The UK will be able to add value to Latin America’s energy boom by producing new financing models. One model is “Green Mortgages” which can fund and deliver clean technology. The basics of the model are to give beneficial financing to environmentally friendly construction to encourage green development.
To help Green Mortgages take off, the government should offer short term incentives to banks and financial entities, so they are able to provide the products. UK lenders should then begin to take environmental factors into consideration for mortgage lending decisions. Another step would be to verify what buildings are environmentally friendly with the government introducing green building passports for residential and commercial properties by 2020.
Examples of these type of initiatives can already be seen in places like the US. In the UK, Barclays is leading the way with green mortgages, categorising buildings into an A or 8 energy rating. Those who chose to live in an environmentally friendly property receive a mortgage rate reduction.
The new green bond market initiative is growing rapidly with the UK government set to take a leading role by deploying the first sovereign green bond, using the money for renewable projects in the UK.