Green Finance: 12th Report of Session 2013-14

Research Organisation
House of Commons' Environmental Audit Committee

Report Date
March 6, 2014

Document summary

The transition to a low-carbon economy will require investors to take account of the reality of a carbon-constrained world. This shift is happening, but there are obstacles to overcome - stock markets are currently over-valuing companies that produce and use carbon (a ‘carbon bubble’ consisting of fossil fuel assets which will have to be left unburned in order to cut emissions to the levels required to limit climate change), and there is a green finance gap with investments currently running at less than half of the level needed to deliver the decarbonisation implicit in national and international emissions reduction targets. The UK, with London at its heart, is a world leader in finance, and there are great opportunities to lead on low-carbon investment. The Government must play a central role in concerted international efforts to address climate change and ensure that markets price- in the cost of carbon. More must be done to secure the required levels of green investment in areas such as low-carbon energy generation, energy efficiency, and transport. ncreasing the flow of green finance is a responsibility divided between different Government departments and other entities. The Government needs to do more to accelerate progress and monitor impact. Working to a single strategy would create greater certainty and a more favourable investment outlook. The Government should re-visit and expand its strategy on Enabling the Transition to a Green Economy to evaluate progress and identify areas for improvement. More information is also available here.