The last three years have been challenging for many businesses across the UK.
Macroeconomic factors - first covid-19, then energy security, to name a few - have forced near-constant revision of plans and projections.
The immediate need to stabilise and survive, rightly, dominated our consciousness and longer-term plans were paused or discarded. For a brief moment, the UK’s net zero emissions commitment looked to be vulnerable.
But delivering on net zero makes commercial sense.
Partly because energy and other efficiencies reduce costs in the short-term; partly because the refinement of best practice and investment in new, greener technology focusses on cost-efficiencies in the longer-term; and partly because the financial markets - and a breadth of financial products - are rewarding businesses who are working to manage their environmental impact.
The financial services sector has a significant role to play in advancing the UK’s net zero goals.
The sector is vast. In 2021 it accounted for 1.1 million jobs - 2.3 million if we include those in related professional services - contributing £173bn to the UK economy and 8.3% of total economic output.
A sector of that size, occupying a sizeable, energy-consumptive footprint, has a demonstrable contribution to delivery of the UK’s net zero target and it is positive that more than 550 global financial institutions have pledged their own individual commitment through membership of the Glasgow Financial Alliance for Net Zero (GFANZ).
Beyond its own four walls, however, the sector wields considerable influence within the economy as a whole. It interacts with every other sector and those interactions are, by and large, relationship-based, involving a degree of oversight of the other parties.
'Influencer' would, however, be a misnomer.
The sector also has a role incentivising, monitoring and supporting businesses: financing renewable projects and new tech solutions; supporting the growth of green businesses with a clear track record; and investing time and resources in relationships with those businesses still working on a credible transition plan, to mitigate the risk that those businesses and their assets are left behind.
We expect the financial services sector to remain committed to backing demonstrably sustainable businesses and projects.
However, it is essential that the sector also continues its active engagement, through 2023 and beyond, with those businesses that may require a little more support with their transition. That engagement will drive better results for the business, the UK and ultimately for the financial institution, not then itself left behind as the legacy funder of stranded, carbon-heavy assets.
Notwithstanding recent challenges, net zero remains the single biggest UK policy and legal driver, impacting entities present, operating in or wanting to do business in the UK.
It presents enormous opportunities for organisations to capitalise on the technology, projects and investment that will flow into those seen as carbon resilient, but also requires active engagement and support of those who are not.
Amy McVey is a director in the Edinburgh-based banking and finance team at law firm Burges Salmon
