London tops green finance rankings, for now

Western Europe continues to be the most mature market

The bi-annual Global Green Finance Index (GGFI) from Z/Yen and Finance Watch ranks 59 cities in accordance with the quality, delivery and depth of green financial services and offerings. It ranks cities based on the quality and depth of their green finance offerings, capabilities and mechanisms.

London claimed the top spot on the first edition of this report in March last year, but had slid down into third place for the “depth” of green finance it is able to offer. The latest report, released this week, shows that London now ranks sixth in this category behind Amsterdam, Luxembourg, Copenhagen, Zurich and Stockholm.

London fares better on the quality score, sitting in first place. However, the study claims that the city leads by a smaller margin than before. In fact, the GGFI anticipates that London will drop to third behind Amsterdam and Copenhagen when the next update is published in six months’ time.

More broadly, ratings of green finance rose in almost all centres globally for both depth and quality, but Western Europe continues to be the most mature market, accounting for nine of the top 10 and 12 places across the respective rankings.

Z/Yen’s executive chairman professor Michael Mainelli said: “Green finance, to date, has depended on public policy. Public policy, to date, has largely been driven by public awareness. This heavy dependence on public policy distinguishes green finance from ‘normal’ finance.

“The strength of centres in Western Europe in green finance reflects both the action taken by the European Union, governments, and regulatory authorities, as well as public demand for action on sustainability.”

London’s high scores reflect the Government work undertaken to embed green finance into key business and policy considerations.

The ‘world’s first’ climate-based government bond index was launched in London last year by global index and analytics giant FTSE Russell.

Since then, the UK Government has launched its highly anticipated Green Finance Strategy, outlining the steps which the finance sector must now take to spur the transition to net-zero by 2050. The strategy features investment and funding increases into green projects, infrastructures and homes and is built on findings from the Task Force on Climate-related Financial Disclosures (TCFD).

Since the launch of the strategy, The City of London Corporation has launched its new Green Finance Institute, headed by Dr Rhian-Mari Thomas. Elsewhere finance giants have launched a string of new “green” products and the London Stock Exchange has begun using the term “non-renewables” to describe oil, gas and coal companies.

Dr Rhian-Mari Thomas, Chief Executive of the Green Finance Institute, said: “Unlike previous economic trends or cycles, the inviolable nature of the physics of climate change means that whilst there remains some uncertainty about how exactly we embed science into our business, finance, regulatory and policy decision making, decarbonising our global economy is an imperative and is ultimately inevitable.

“Successfully reallocating capital towards the opportunities presented by this economic transformation requires an understanding of the technologies and the social behaviours that are rapidly replacing existing systems.”

Matt Mace