Panel discussion: How do we boost investment in net zero and green growth?

0:04 – 0:43

Well, thank you very much for that introduction, Greg, and it’s good to see everybody staying for this session because I’m sure it’s going to be a really fascinating one. And I want you to get active with your slidos, because I’m determined to follow Greg’s instruction that we should have some questions from the audience at each session. However, We’ve only got 25 minutes to talk about the critical question of how to boost investment in net zero and green growth. I must say, if one thing came out clearly to me from the session on how cities and regions can drive growth, it was the vital need. Several things came out of that, but one was the vital need to leverage in private finance.

0:43 – 1:10

And that is just as true of the net zero imperative as it is for any other form of investment. And whether we aim for and achieve net zero for 2050 or whether we take longer, we still need to unlock significant sums to get there. So I’m delighted to have in 25 minutes the opportunity to talk to the three of you. Is my MIC working properly at the back? Can you all hear me?

1:12 – 1:13

Okay, thank you.

1:17 – 1:20

Right, our trusty assistant is coming back.

1:28 – 1:51

Okay. Is that better? Excellent. Well, what I’m going to do is I’m going to ask each of my panelists to start by introducing themselves very briefly and telling us as a starting question, what they each see as the single most critical investment priority for towns and cities if the UK is to stay on track for net zero growth. And I’m going to start with you, Lorna, if I may.

1:52 – 2:27

Thank you, and it’s great to be with you all today. So, National Wealth Fund, I hope you’ve all heard of it. It was established in October last year. I hope my MIC is working, by the way, by the Chancellor, sharing that the UK Infrastructure bank was going to transition into the National Wealth Fund, so it wasn’t going to start a new organization again to become the fund. Our organization had been established over three years and we had done sort of over 40 deals already and deployed quite a lot of capital.

2:27 – 2:44

So what has made us different as a National Wealth Fund? We have obviously no longer got infrastructure in our title. That means we can invest both from the private and the public sector in sectors outside of infrastructure. So. So quite different for our organization.

2:45 – 3:35

And we are also deliberately going to align with the growth industries in the industrial strategy, which we’ve heard quite a lot about this morning. Not all of them, I hasten to add, because we are a relatively small organization. But we will be confirming shortly with treasury, which of the sectors within the industrial strategy, we can deploy our additional capital. So we now have 27.8 billion to deploy instead of 22, which we had as the UK Infrastructure Bank. To your question, which I hadn’t forgotten, I’m not sure there’s one single thing I would stress because working with all the MCAs in particular across England and Glasgow city region, there are different priorities, quite rightly, for different cities and different regions.

3:36 – 4:35

But I think two things that we certainly see, firstly, the investment pipelines needs, by and large quite a lot of work to get projects to be in an investable position. So we will be leaning in to be able to support them to develop those. But I think the other thing that we see is that there are definitely areas of consistency across the UK transport we’ve heard of already this morning. I think the decarbonisation of transport is huge for our cities, whether that’s through mass transit schemes, whether that’s through new zero buses, whether that’s through EV charging, all really key right across the UK in our cities. I think heat networks, decarbonising our heat is also a real focus area for cities and there are some real commercial challenges in actually understanding, understanding how we can do the deals on those sort of new nascent type technologies.

4:35 – 5:20

And then finally, I couldn’t fail to mention retrofit because not least there is a huge amount of housing stock that needs retrofitted across the country, but also the supply chain for the retrofit market in particular just isn’t that established yet. And we’ve certainly been leaning in over the last year with guarantee schemes to commercial banks to do more to push forward that market. And I’ll stop there, thank you very much, Lorna. I’m going to turn now to Claire, Claire Dorian from the Stock Exchange, both to introduce yourself and answer that question about the single most critical investment priority. Thank you, Katherine, and delighted to be here and it was great because we hosted a market open just over the road at the Stock Exchange to kick off this.

5:20 – 6:02

So really pleased that we can also be part of the conversation today. So. So I head Sustainable Finance in our markets division at the London Stock Exchange Group. So that is the division that is home to the London Stock Exchange PLC and FX business and post trade and clearing. But we are as a group, much bigger footprint, a bigger carbon footprint, but also a bigger footprint that we have as an organization supporting across the data spectrum and understanding ESG data, carbons emissions data, right the way through to Russell and index design.

6:02 – 7:11

That is done around, say, for example, Climate tilted indices. But my part of the business that I’m responsible for is very much focused on how are we supporting those early stage businesses that are looking to raise capital to be able to list on the London Stock Exchange markets, whether that’s raising green finance or whether it’s actually some of the businesses that we do have on our markets that are in heavy emitting sectors that are transitioning to the low carbon economy. How do we support them in terms of raising finance to transition to the low carbon economy? But also another bit important piece around the work that we do is that engagement with policymakers and regulators and governments around what are some of those reporting requirements and regulations that increasingly companies are being required to follow for their investors and stakeholders. And as sort of, as a, as a wider group, a lot of our work is also engagement with asset, asset owners and asset managers.

7:11 – 7:54

So we have a really important role in being able to sort of sit at the heart of that market and how we can convene all those different customer groups around this. From answering the question, I try not to say exactly what Lorna said, to be honest, because I think, you know, you can answer this and think about it from a couple of points of view. Actually, you know, a single critical is really hard to land on a single critical investment piece. I think some of that starting point, and I think, Catherine, you were alluding to it in your opening remarks, is actually how are we bringing different sources of capital together united around this? It isn’t about public capital over here on one side, private capital over on another.

7:54 – 8:17

Actually I think the priority piece is the sources of capital coming together to solve some of the real world problems that we’re facing today. And then that can be applied into energy efficiency in transportation. Absolutely. Renewable energy, greening supply chains. I think there are so many different components of this to look at.

8:18 – 9:04

I think absolutely. If we were to think of an industry through it, through the lens of an industry sector, then transportation is really important for all of the many reasons, Lorna, that you said in terms of electric vehicles and sort of the opportunity piece there. But I think we need to not lose sight of the bigger world problems and sort of the different dynamics that different cities will in turn face. And really it’s about how can we support innovation, how can we support growing the businesses that are trying to get us to net zero and making sure that they have the infrastructure to be able to scale and grow and to stay here in the UK as well. Great, thank you.

9:04 – 9:25

And some of those themes we will want to explore in A minute and thank you for the market opening this morning, which was great, great way to start the day. Mete, over to you now. Yeah, firstly, thank you, Catherine and thank you to connect to Place Summit for inviting me. My name is Mete Coban, I’m the Deputy Mayor of London for Environment and Energy. It’s great to see so many friends in the room.

9:25 – 10:30

I think, firstly, it’s really important from a London perspective. The Green transition for us is an opportunity to think about how we fundamentally redistribute wealth to working class communities and actually how we redistribute wealth across our city to make sure that the benefits of the green transition and of net zero is really tangible and means real things to people and it uplifts every single Londoner and it’s a matter of social, racial and economic justice for lots of us in Londoners. So for me, the biggest challenge, you know, when we look at some of the, I guess the global context of, you know, the conversation around net zero and I know, you know, there was an intervention yesterday too, you know, this isn’t just a something that we have to do. This is something that fundamentally is a huge opportunity for so many of our communities and this whole agenda of growth we green, you know, it shouldn’t be growth v green actually you can get growth green and it’s about how do you make it really tangible to communities. So, you know, for example, Lorna was talking about what we’re doing around retrofit and what we need to do around retrofit.

10:30 – 11:14

You know, that is fundamental to our mission in London because right at the heart of it, that’s really helping support Londoners around their energy bills during a time of cost of living, helping create more jobs, but at the same time helping us also reach our environmental ambitions. And it’s the question about, you know, not to repeat a lot of what’s really being said, but the key, what we need to see in London and I guess in the UK is how do you really drive and accelerate the scale question. Right. You know, we’ve got really good examples of things that are happening in transport decarbonisation and what we’re doing around, you know, the rollout of zero emission buses. We’ve got more zero emission buses in London than you have buses in Manchester, for example, and it’s the largest fleet in Western world.

11:14 – 11:55

You know, the rollout of EV chargers across the city to on retrofit. We just announced warmer homes London, which can really increase 22,000 homes across the city, which is really bringing Together all of the boroughs on collective action to really end the sort of the bidding wars that previously existed with the way the money was allocated from central government. So there’s lots of things we can do. I guess the challenge for us is, is we’ve got really good pockets of examples of things happening. The question is now is how do we get that pilots and examples into scale in a way that really sends the right signals to the market and really drives the investment that both Claire and Lorna has been talking about.

11:56 – 12:20

Thank you. And I’d like to stay with you for a second, Matte, and ask you what the biggest barriers London faces when trying to attract investment into net zero projects and how public finance could help unlock more private capital. Yeah, that’s a great question. I think, you know, again, just to really build on what I was saying, I think it’s the scale question. I think partly the biggest barrier that we face in London is.

12:20 – 12:57

And what we’ve seen, unfortunately, and not to make this a sort of a political sort of point, but, you know, I think partly the problem has been over the last 10, 15 years is that we haven’t had the right framework to give the confidence to the private sector to invest or people knowing that, you know, when they do invest, it’s actually feeling as part of a wider mission. And that’s why, you know, in London we have a 2030 target for net zero. We think that’s important. Of course, it’s a challenge, but it’s important to make sure that we actually, you know, provide the right signals to all of the different industries to be able to sort of make their investments steadily around that. The key challenge for us is, as I say, is the scale question.

12:57 – 13:33

It’s something that I’m working at City hall right now, which is around really thinking around, you know, we’ve got really good pipeline of projects that we’re developing. So, for example, we have something called the Zero Carbon Accelerator from the City Hall. The purpose of the Zero Carbon Accelerator is to develop a pipeline of projects where it was around heat networks, whether it’s around, you know, like energy, wider energy, decarbonisation, all of these interesting projects that we’re developing. The key thing is how do you get away from investments around, you know, like maybe a couple of million there or a couple of million here, and actually make it, you know, much more larger attractable propositions for. For it to be worthwhile for some of our larger players in the.

13:33 – 13:46

In the private sector, really. And looking at how do you. How do you use public Sector finance to unlock investment in the private sector too. So that’s something that we’re currently looking at now. And of course, you know, like goes without saying, we need your support.

13:47 – 14:19

You know, this isn’t something that I think government can solve by itself. I think we need the support around that. And hopefully in the summer of this year for London Climate Action Week, we’ll be setting up a Green Investment Summit in London with the aim of really answering that question around how we can really accelerate and drive the £75 billion of investment that we need in London’s green economy to reach net zero by 2030. Yeah, great, thank you very much. And Lorna, let me turn to you because I’m sure you will have views on how public finance could be used more strategically to crowd in private capital for these agendas.

14:19 – 14:51

Yeah, of course. And to be honest, in a nutshell, that is why the Fund has been established by government to be a catalyst, or dare I use their phrase, turbocharged the private investment market. But I would also say in very specific sectors, we are a very small organization and therefore we can’t be all things to all people, which we’ve already heard from the floor this morning. But I think it’s really important to reflect that. So the purpose of our organization is, is twofold.

14:51 – 15:46

It’s to transition to net zero, and it’s also to support and drive growth. And through that, we partner with local government and the private sector already to deploy our capital. And to date, we’ve only been able to do that in infrastructure sectors such as water and waste and digital transport and clean energy. Going forward, as a National Wealth Fund, we will be able to do that more broadly with, for example, the growth industries in the industrial strategy and also government promoted quite strongly before the formation of the Fund, that carbon capture, for example, and ports and green hydrogen and green steel and gigafactories needed more investment. So the additional 5.8 billion we’ve been given as becoming the National Wealth Fund will specifically be going to sectors such as those.

15:46 – 16:21

And I think that’s quite key because what we also must do is crowd it, crowd in on our journey. So we might not always have the private sector with us at the start of our deals. And that’s largely because we are expected to lean in and take more risk. And the point on the risk I couldn’t fail to mention, but it has been said that perhaps as an organization we don’t take enough risk. But actually, compared to a commercial bank, the Fund takes four times the the level of risk of A commercial bank, twice the level of risk of the eib.

16:22 – 16:55

And therefore we actually already are taking quite a lot of risk. But what we would observe is the UK is not very good at taking risk. And actually collectively, to get the level of growth that we’re looking for, we all have to take more risk collectively. And generally we see in deals that it’s a case of, well, who’ll go in first and who will take the most risk and we’ll follow you that old number. Now, we are prepared to do that, we are prepared to go in early, but we must ensure that the private sector comes in behind us.

16:55 – 17:34

So my earlier point around, we’ve done over 45 deals now. We may have deployed 4.5 billion, we’ve brought in over 12 and a half billion of the private sector capital. And that is the key. So that’s three, three times the level of private sector investment that we have made initially. And I think the other point I would raise as well, we’ve heard a bit about grants and I think increasingly government and treasury, our shareholder, are aware that grants are really not necessarily the right answer, because there is no return on a grant, it is spent anyway, whether the project ever happens or not.

17:35 – 18:14

So as a National Wealth Fund, we are working far more closely with government departments to ensure we get a greater return for what money the government does have. So there’ll always be a place for some level of grants, but not necessarily to the level that we’ve seen previously. And actually deploying capital into projects that we’ve commercially kicked the tires on at the start, and we can see there will be revenue generating and there will be affordable and sustainable is undoubtedly going to be the way we have to look at our projects and investments going forward. I’ll stop there, thank you. And your point about risk and we all need to take a bit more risk.

18:14 – 19:15

I think there may also be a question of looking at risk in a different way and it might tie in with Andrew from the last panel, his comment about the need to take a long term outlook. But this is perhaps the subject for another panel because we’ve only got six minutes left and I want to turn to Claire and ask her for a little more on this stock exchange exchange’s role and place here. I mean, how, how does the London Stock Exchange provide listed companies with the opportunity to boost their sustainability credentials? For example, I think, you know, what you were saying about, you know, needing to have that access to capital, that appetite for risk is really, really important. And we see that, you know, in, in the work that we’re doing at the London Stock Exchange because we’re working with companies at potentially quite an early stage and they’re navigating through the different rounds of finance but actually want to sort of set themselves up for that journey of potentially being a listed company in the future.

19:15 – 20:28

But more and more, you know, what we’re doing at the London Stock Exchange is actually being slightly indifferent as to whether a company is public or private. So we’ve been working to create a, the sort of funding continuum as we’ve been calling it is going to be a platform called Pisces that’s will be launched that is about how do we support auctions and activities in the private company space. Because it’s really important that we enable businesses to be able to tap into the right sorts of capital that support them at the right stages, that their development of their evolution and for them to be able to have a voice with investors and for those investors to understand what they might be doing as a business and you know, b, are they sustainable in, in their approach? And I think that sort of sustainability label over, over the years, you know, is, can get slightly confusing, misleading with the whole sort of, you know, greenwashing, green hushing piece always comes out as well. And I think we need to be clear about how we recognize businesses that are on our market.

20:28 – 21:07

So for example, on a business that’s listed on the London Stock Exchange, we could view that through the lens of what does the business actually do. So just as a bit of an example, we have a green economy mark that we provide to companies that are funds or equity issuers that are listed on the London Stock exchange that generate 50% or more of their revenues from green environmental products and services. So that’s not about whether they’re good at esg. That’s very different. There’s different data, there’s different scores, there’s different metrics that are looking at that, you know, heavy emitting sectors on our markets are not necessarily going to get the green economy mark, which I think is absolutely right.

21:07 – 21:34

But I think investors don’t forget. Why do we come up with all of these definitions and labels? In the first instance, it’s often because investors wanted to know this information. You know, when you’ve got 80% of investors looking at ESG credentials in their investment portfolios and their asset allocation, this thing, this matters. And so that’s why we know companies want to be able to articulate, showcase what they’re doing.

21:35 – 22:05

And then there’s, there’s other ways. Obviously I Said looking at lens through ESG and data. But also there’s a lot of ways in which the London Stock Exchange supports raising of debt capital on our markets as well. So there’s a lot of social bonds, sustainability linked bonds, transition bonds that you now see on our markets. And then also, you know, as sustainability has evolved over time, so does the sources of capital need to evolve as well.

22:05 – 22:49

So we now also support companies and funds that are investing in climate change mitigation projects that could generate carbon credits. So that’s another important part of the market and obviously what might come from that, you know, in terms of nature and biodiversity as well. So I think there’s, I think the message is, you know, there needs to be the right sources of capital recognition for issuers so that they can use that in discussions with investors because it is really about how do you articulate your story to get the best sources of capital that are aligned to your business objectives. Thank you. We’ve only got two minutes left.

22:49 – 23:12

I promised I’d get in an audience question. The only question I’ve got on slido is where we have transport projects that offer no financial return but reduced CO2 emissions. Where do we get the funding from when treasury funding always demands a 5 case, 5.0 business case. Now, I think there’s two parts to that. There’s the hoops people have to go through to make the business case.

23:12 – 23:34

But there’s also, how do you finance a project that apparently produces no financial return? And 1 of 30 seconds each. Any answer to that, Lola? So I think that’s not a new program, not a new problem, sorry for transport. I think it’s quite an old problem for transportation.

23:35 – 24:24

So I think DFT have been grappling with it for a long time and I think the private sector for a long time have been quite keen to be more involved actually with transport projects than they have been to date. So from our perspective, we’re working very closely with public sector local government organizations to make sure that actually their transport projects are structured in a way that they are more attractive to the private sector, that they are optimized and therefore, for example, the balance of risk is, is clear. And it’s not just all sitting with the private sector that will get the private sector to the table more quickly than anything else today. And I think also working closely with DFT in particular to ensure that collectively as a market we can push and get these forwards progressing projects. Progressing is key.

24:24 – 24:25

Thank you. Anything, Claire?

24:28 – 25:02

No, I think the reality is that it comes back to risk. I think, doesn’t it? There has got to be that recognition that in order to grow to scale, there has got to be an element of risk that is taken and perhaps we need to follow other countries examples of being able to allow us to fail and because ultimately will succeed. Yeah. And there may also be something linking in with what you just mentioned about carbon credits and looking at what a financial return is and what is an alternative sort of return if fund structures mete.

25:02 – 25:29

I’m sorry, what would you like to add? I mean, I’ll just be 10 seconds. I think with all of this conversation that we’re having, I think fundamentally the one thing that we mustn’t forget is that everything we do ultimately is about people’s livelihoods and the impact it has on people. We’ve got this huge ambition and the climate emergence that we know we need to really accelerate pace on. But at the same time, what we need to be very cognizant of is that what we don’t want to do is end up doing two communities and leaving communities behind.

25:29 – 25:55

So I think there needs to be a conversation in all of this wider conversation around how we drive investment around how do we actually make sure that communities are at the real heart of shaping off their neighborhoods and how do we actually take them along and really co produce, co design and create that sense of shared ownership of what we’re trying to create in terms of a much more prosperous and thriving economy that really works for everyone. Great, thank you. I said we didn’t have long enough with this panel. I think we’ve proved it. They’ve been a great panel.

25:55 – 25:57

Can we give them a round of applause?