PCAN Finance Platform
For the latest updates from the PCAN Finance Platform, skip to the News section below.
For place-based climate action to be successful, considerable flows of private and public finance will be needed, along with breakthrough innovations. Established in 2019, the PCAN Finance Platform aims to build a community of practice which helps to connect the supply and demand for finance at the local and regional levels, starting with the three Climate Commissions in Belfast, Edinburgh and Leeds.
To do this, the Platform will seek to work at three levels:
i. Mobilise finance within place: The Platform works with the Climate Commissions in the three PCAN cities, aiming to identify the scale of finance required, the potential sources of finance and innovative tools that can be used.
ii. Mobilise finance into place: The Platform works with key UK financial sector institutions, alliances and policymakers to improve the flows of capital into place-based climate action. This will build on initiatives such as the UK’s Green Finance strategy.
iii. Mobilise finance from place: Once the Platform is up and running, it will also explore how the financial community within the PCAN cities can play a catalytic role within their immediate areas and regions and potentially beyond.
To achieve these goals, the Platform will conduct research into critical challenges, identify emerging solutions, convene place-based workshops connecting key stakeholders and set out critical actions that are needed across the financial system.
The Platform is led by Nick Robins, Professor in Practice for Sustainable Finance at the LSE’s Grantham Research Institute.
Workstream: financing place-based action for the just transition
The initial focus of the Finance Platform has been to identify how finance can support a just transition at the local level. The just transition is recognised as a key dimension of a successful shift to a net zero and resilient economy. As the UK’s Committee on Climate Change, for example, has concluded that strategies are needed to ensure that the transition “is fair and is perceived to be fair” (Net Zero: The UK's Contribution to Stopping Global Warming). Questions of how the transition will affect workers and communities are top of the list of priorities in place-based action, not least how to ensure that climate action can positively contribute to reducing inequality and exclusion and leave no-one behind.
Here, the Platform has built on the pioneering research and dialogue conducted by the LSE’s Grantham Research Institute on Climate Change and the Environment, working in partnership with the University of Leeds to understand the role of the finance sector in the just transition.
- Investing in a Just Transition: More than 30 UK investors have committed to support the just transition and a Roadmap of actions was published in October 2019 with PCAN. The Roadmap was developed by the LSE and Leeds University working in partnership with the Principles for Responsible Investment (PRI) and the Trades Union Congress (TUC). It focused on how investors can respond to place-based needs in the Yorkshire and Humber region through a series of case-studies in different Barnsley, Hull, Leeds, Selby and Sheffield. The Roadmap includes key recommendations for action including shareholder engagement, capital allocation and policy reform.
- Banking on a Just Transition: Banking is the largest segment of the UK financial sector and will be critical to ensure flows of finance for place-based climate action. The Banking on a Just Transition project aims to identify how banking can support a just transition across the regions of the UK. An initial discussion paper was produced in October 2019 with PCAN. This pilot project is led by the LSE’s Grantham Research Institute, working in partnership with the University of Leeds and UK Finance.
The Platform has co-convened a number of place-based finance workshops to understand the critical needs and opportunities:
- Edinburgh: This workshop focused on how banks and investors can channel capital for climate action both in the city of Edinburgh and Scotland more broadly. Scotland has established a Just Transition Commission and Scotland’s Minister of Public Finance spoke at the event attended by leading representatives of finance, policy and civil society. (See this commentary.)
- Birmingham: Hosted at HSBC UK’s headquarters, this event focused on the particular needs of small and medium sized enterprises (SMEs) to gain access to capital to deliver a just transition. Key insights included the need to ensure that the transition is fair for entrepreneurs, particularly in black and minority ethnic communities.
- Bristol: Held with the Cabot Institute and Bristol City Council, this event highlighted the potential for green finance innovation at the local level, learning from Bristol’s City Leap process as well as leading banks and investors in the city. It also highlighted the importance of involving vulnerable communities in decisions about finance.
- Leeds: Housing is one of the key areas for climate action and this workshop hosted with the University of Leeds examined how finance can be raised to make all buildings net-zero and resilient and do this in ways that gave priority to ending fuel poverty. The workshop also highlighted the need for finance to support high social standards along the construction and building value chain.
- Cornwall: Rural areas are often marginalised in terms of finance and national climate action. This event with Cornwall County Council at the Eden Centre highlighted the need for anchor institutions such as the new South West Mutual to meet the needs of local households and businesses in the transition. (Read the press release from Cornwall Council.)
- Belfast: The Belfast Climate Commission held a first meeting to identify the role of the finance sector in ensuring a just transition in Northern Ireland at Queen’s University Belfast (QUB) on Friday 24 January. Over 40 senior stakeholders from across banking, investment, devolved and local government, academia and civil society met to discuss how a just transition can be achieved in Northern Ireland and what the role of the finance sector should be. (Read the news story and watch the video below.)
Further place based dialogues took place in March 2020 in Cardiff and Manchester.
Banking on a Just Transition - Final report
• At the heart of the recovery from COVID-19 should be the convergence of at least two national imperatives: the creation of a successful net-zero-emission economy and ‘levelling up’ economic and social prospects across the UK. This is the challenge of the just transition – delivering climate action that generates positive social impact.
• Finance will be crucial to making the just transition a reality, from institutional investors, banks and building societies as well as public finance.
• Some banks are starting to align their business models with net-zero. Efforts like these now need to be scaled up in ways that help to make the economy more resilient, more inclusive and more regionally balanced by extending their strategies to incorporate the just transition.
• The just transition is not yet-another framework for banks to adopt. Instead, by looking through the just transition lens, banks can strengthen their existing initiatives to cut climate risk, increase green finance and build resilience over the long term.
• Banks can make considerable contributions to the just transition through their own efforts but their scope for action is significantly influenced by the policy regime in terms of correcting market failures, regulating the financial system and allocating public finance to generate public goods. This is an agenda with high potential for partnership between the financial sector and government.
Overarching recommendations for banks:
1. Board and senior executive leadership commit to ensuring that the just transition agenda is incorporated into institutional strategy and culture
2. Make the just transition central to the bank’s core purpose and culture
3. Outline a clear institutional strategy for how the bank plans to operationalise its just transition commitments
4. Serve customers by developing a core portfolio of financial products and services that helps them achieve net-zero in a socially inclusive manner
5. Work with stakeholders to respond to diverse place-based needs
6. Engage actively in policy to encourage the right enabling framework
7. Engage in dialogue with others to develop breakthrough partnerships
8. Increase accountability by reporting on progress against just transition goals
Overarching recommendations for government:
1. Make a strategic commitment to a just transition
2. Kick-start the just transition through the UK’s COVID-19 recovery plans
3. Mobilise public finance behind the just transition
4. Integrate the just transition into financial regulation of climate risk
5. Commit to supporting place-based action to deliver a just transition
6. Make the just transition a key part of international climate action
The final report of the Banking on a Just Transition pilot project was published on 14 July 2020 (see downloads below).
Place-based Climate Finance Toolbox
The Finance Platform team is working on developing an online toolbox for local authorities, climate commissions and other stakeholders, allowing them to browse for financial instruments and schemes to finance local sustainable projects such as green home retrofits, clean energy installations or EV charging infrastructure. The intention is for the toolbox to be open-source and part of the Finance Platform. The team intention is to distribute the first concept note in regard to Q1 2021.
UK announces it will issue a green sovereign bond
On 9 November, the Chancellor announced the launch of the UK's first sovereign green bond, explicitly targeting projects 'to tackle climate change and create green jobs across the country'. This is a major victory for us – the UK had been resistant to issuing a green sovereign bond and we identified it as a keystone priority in the 2019 Investor Roadmap.
Since the Roadmap, we've been targeting a sovereign bond as a way of kick-starting investment in climate action and doing this in a way that could support the just transition in terms of jobs across the country. Nick Robins wrote a blog for Responsible Investor on why governments should issue just transition bonds - and then COVID came along exposing the need to connect green and social issues.
Green + model attracts £10trn in assets
Over the summer, PCAN's finance team worked hard with the Green Finance Institute and the Impact Investing Institute to design the Green+ Gilt proposal, which gained the support of 40 investors with £10trn in assets, targeting green and social benefits. The Green+ model is a way of getting the Just Transition dimension into policy. We have had very good feedback - and a CEO at a major investor has told us that we should take a lot of the credit for this. It's by no means a full 'Just Transition bond' but the link to 'green jobs across the country' gives us a foot in the door. We will continue to focus on connecting the green and social themes in the sovereign bond over the coming year.
Launching the Financing the Just Transition Alliance
The Financing the Just Transition Alliance is being launched on 19 November with the goal of translating the growing commitment to a just transition from investors and banks into real world impact. It will seek to deepen the implementation of the recommendations from the twin reports on the role of investors and banks. The Alliance will concentrate its work on three levels, including financing place-based needs across the country. Belfast, Edinburgh and Leeds Climate Commissions are members of the Alliance as well as PCAN itself. We will present results ahead of COP26 in November 2021.
We’ve had a really enthusiastic response and gathered nearly 40 members: Abundance Investment; Aviva Investors; Barclays; Big Society Capital; British Business Bank; Brunel Pension Partnership; CCLA; CDC; Church Commissioners; Climate-KIC; Federated Hermes; Finance Innovation Lab; Friends Provident Foundation; Green Finance Institute; HSBC UK; Impact Investing Institute; Institutional Investor Group on Climate Change (IIGCC); Investor Forum; Local Government Pension Fund Forum (LAPFF); L&G; Lloyds Banking Group; Nationwide; NatWest; Principles for Responsible Investment (PRI); Responsible Finance; Royal London Asset Management; SouthWest Mutual; Thirty Percy Foundation; Triodos; TUC; UK 100; UK Finance; UKSIF; and Unity Bank. The Place-Based Climate Action Network (PCAN), as well as the Belfast, Edinburgh and Leeds Climate Commissions are also members along with the Grantham Research Institute, London School of Economics.
How a just transition can speed up the race to net-zero, by Nick Robins (26 November 2020)
Five principles to mobilise finance for a sustainable and inclusive recovery by Nick Robins (6 May 2020)
Coronavirus: how economic rescue plans can set the global economy on a path to decarbonisation by John Barry (22 April 2020)
How Scotland can mobilise finance for a just transition, by William Irwin, Nick Robins and Jamie Brogan (25 October 2019)
Other finance reports
Forward, Faster, Together: Recommendations for a Green Recovery in Edinburgh (produced by Edinburgh Climate Commission, July 2020)