An environmental, economic vision for the UK
Rt Hon John Glen MP, Chief Secretary to the Treasury delivered a speech on why and how we can mobilise resources and rewire the global financial system for a sustainable, prosperous future.
Good morning and thank you for your kind introduction and invitation to come and be part of this conference today.
I’m truly humbled to be here with you, because there is nothing more precious than protecting the natural world.
And while I’d rather not draw attention to my age – not least because it’s April Fools’ Day in a few short months, when I will turn 49.
The sad fact is in my lifetime, we have witnessed close to a 69% drop in wildlife populations.
Despite what my step children say, I’m not an old man and yet since I was born, freshwater populations alone have dropped by an average of close to 83%.
Where I was born into a world of abundant rhinos, leopards, tigers and gorillas, my children find a planet where 1 million species are threatened with extinction.
Where I was born into a world of expansive coral reefs and vast forests, if I have grandchildren, they could find habitat loss on an unimaginable scale.
And where I was born into a world where many did not know better, today we all do.
We know that biodiversity has been declining at a rapid rate because of human activities, such as land use changes, pollution and climate change. And it’s brought some species to the brink of extinction.
Successive governments, in the UK and across the world, have failed to put in place the measures demanded by our collective responsibility for this loss.
So, we need to act now, urgently, to protect ecosystems. And if the moral argument wasn’t enough, we all know that degradation can have real impacts on global GDP.
There is an irony here, because for centuries natural capital assets – meadows, woodlands, wetlands – have been allowed to degrade, as an accepted cost of economic growth.
The conflict between growth and the environment is a false dichotomy; the environment is the foundation for our economy and society.
We need to mobilise the resources and finance to tackle the problems of today, so that tomorrow might be better.
Whether you are from the Brecon Beacons National Park, you are focussed on ESG for a large corporate, are an investment manager or banker, from the WWF, or a university student – I know that the people in this room have the passion and expertise required to meet this enormous challenge.
And so today, what I want to speak to you about is money, and how we channel it into tackling this shared challenge.
Ambitions
The truth is that many international targets have not, and are not, being met.
That is a truth completely at odds with our collective aspiration.
Led from the front by the Prime Minister, this government recognises that global ecosystems are vital to our collective health, well-being, and economic prosperity, and that biodiversity loss is a global issue which requires a global solution.
And our vision for the environment is an economic vision.
It is grounded in the cost and benefits of action or inaction.
In 2019, my department, the Treasury, commissioned an independent global review on the economics of biodiversity led by Professor Sir Partha Dasgupta.
The central conclusion of the review was that nature, and the biodiversity that underpins it, ultimately sustains economies, livelihoods and well-being.
The estimated stock of UK natural capital has most recently been valued at £1.8 trillion, though this is likely an underestimate. And with the global stock of natural capital per person having declined by nearly 40% between 1992 and 2014, we must invest in and maintain it.
Alternatively, failing to act risks long-term prosperity, with around 54% of global GDP being moderately or highly dependent on nature.
Biodiversity
So, by 2030, we want to halt and reverse global biodiversity loss. It’s a target that can and must be met.
How?
It starts at home. We have taken this world-leading action here in the UK because we are resolved to being the first generation to leave the environment in a better condition than we inherited it.
In January, the Prime Minister set out his vision in our Environmental Improvement Plan.
It provides a blueprint not just to halt the decline of nature in our country, but to reverse it.
Our action is led by our world-leading, legally binding target in England to halt species decline by 2030; then to reverse the decline by 2042.
We have also set legally binding targets to reduce the risk of species extinction by 2042; and restore or create more than 500,000 hectares of wildlife-rich habitat, also by 2042.
We are investing more than £750 million in tree-planting and peatland restoration through our Nature for Climate Fund…
…launching the Species Survival Fund…
…creating, restoring, and extending around 70 areas for wildlife…
…protecting 30% of our land and sea for nature…
…supporting a transformation in the management of 70% of our countryside by incentivising farmers to adopt nature friendly farming practices…
…reducing the key drivers of species decline, from pollution to climate change…
…and taking targeted action to prevent the loss of our rarest and fastest declining species.
That is a lot of action that will increase the prosperity of our country and work in conjunction with our international efforts.
Such as that taken in December, when 196 countries agreed a landmark new global deal for nature at COP15 – the Global Biodiversity Framework.
My colleague, the Treasury Lords Minister Baroness Penn, was there, signifying the ongoing fundamental importance of nature and biodiversity to the Treasury. And she tells me of the strong representation from businesses and financial institutions she met with in Montreal.
The framework recognises that the shift to a nature positive future cannot be accomplished without greater investment. That is why, in that framework, we – both governments and the private sector – have committed to mobilising at least $200 billion in investment each year.
Of course, while government cannot and should not try to fix everything by themselves, they will have a huge role to play. We simply can’t turn the tide on this issue without the sums that many governments have at their disposal.
Under our COP26 Presidency, we got 145 countries to sign the Glasgow Leaders’ Declaration and agree to halt and reverse deforestation and land degradation by 2030.
A year later, at COP27, we made more than £150 million available to protect rainforests and natural habitats, including the Congo Basin and Amazon.
We have launched a £500 million Blue Planet Fund, to support developing countries to protect the marine environment and develop sustainable marine economies.
We committed to triple climate adaptation from £500 million in 2019 to £1.5 billion by 2025.
Very importantly, we also reaffirmed our £11.6 billion commitment on international climate finance, spending at least £3 billion on solutions that protect and restore nature.
And these investments are seeing tangible results.
Between 2011 and 2021, we provided £250 million through our Forest Governance Markets and Climate Programme, which helped countries tackle illegal logging, illegal deforestation, and weak governance. The success of this programme means that today 100% of Indonesia’s timber exports are sourced from independently audited factories and forests. In 2005, just 20% of Indonesia’s timber was legal.
Our International Development Strategy also committed to ensuring our Official Development Assistance becomes ‘nature positive’. This means aligning it with the international goal to halt and reverse biodiversity loss by 2030, and the Global Biodiversity Framework.
However, public funds alone will not be sufficient to close the biodiversity gap of $700bn.
While over half of the world’s GDP reliant on nature, private capital represents just 17% of total investments in nature.
We must therefore rewire the global financial system to align with our ambitions.
Private investment in nature recovery
As I mentioned a few moments ago, governments have a key role. In the UK, currently, the government is the largest investor in nature recovery in the UK.
But our entire economy - indeed the entire global economy – is dependent on nature. There simply would be no economy without nature.
So, it makes complete sense that private investment would be warranted and welcomed.
That is why we’ve announced a target to raise at least £500 million in private finance to support nature’s recovery every year by 2027 in England, rising to more than £1 billion a year by 2030.
Our Environmental Improvement Plan and Green Finance Strategy set out how we will unlock private sector investment in our domestic natural environment.
Nobody here today needs telling that this will not happen without supportive policies.
Too often we hear that the standards and rules for investing in the full range of carbon and nature recovery projects that need investment are underdeveloped or unclear.
We cannot expect farmers and conservation experts to commit to projects, or investors to mobilise resources at significant scale, without a robust, stable and reliable market framework.
Nor can we expect the public and environmental experts to trust these markets where there are concerns about lack of transparency and the potential for greenwashing.
This is why we called for evidence last year to support the development of an updated Green Finance Strategy.
As part of the strategy, which will launch later this year, we will have a new policy framework for nature markets. This will provide clearer principles and policy guardrails for the development of new nature markets, including new arrangements to accelerate the adoption of robust standards for investing in a broader range of ecosystem services.
The strategy will also set out our next steps to build on the momentum generated under our COP26 Presidency to strengthen and scale up voluntary carbon markets worldwide – with the UK playing a visible role in championing and support high integrity.
We have also committed to invest £30m of de-risking capital into a new, private sector, blended finance impact fund for domestic nature recovery: the Big Nature Impact Fund.
Managed by Federated Hermes and Finance Earth, the fund will crowd in significant levels of private capital, through the use of catalytic public investment.
The blended capital will catalyse and invest in a portfolio of high-integrity nature projects, generating revenue from ecosystem services such as carbon sequestration, biodiversity and water quality.
The investee projects will create biodiverse woodlands, restore peatlands and create other priority habitats, in line with the Environmental Improvement Plan I have just set out.
By taking a blended finance approach and aggregating these projects up to an investible level, the Fund will help lower transaction costs and reduce risks, bringing the risk profile of these projects in line with institutional investors’ appetite.
The aim is to develop a track record for private sector investment in nature recovery at scale for others to follow and to help close the funding gap for nature.
And it’s not just investment we need: it’s expertise to deliver the recovery of nature.
And let me give a few examples.
I am a great admirer of the work done by the Royal Botanical Gardens through their Landscape Ecology Programme at Wakehurst – seeking to collect high quality scientific evidence of the value of UK biodiversity, using strong scientific data to inform and influence land management policies. They are doing this across the four pillars of carbon, pollinators, water and nature connectedness.
Next month, reflecting my personal constituency interests in Salisbury, I’ll be visiting the Allerton Project in Loddington, Leicestershire – which has been at the cutting edge of research into sustainable farming methods, biodiversity and habitat creation, and rural landscape management for over 30 years.
In 2021, the Allerton Project received funding from our Natural Environment Investment Readiness Fund to support them in creating an innovative standard for hedgerow carbon and leverage private investment into nature recovery on farmland.
It’s research like theirs that can be used to inform both practice on the ground, and help us get policy right at the national level.
Green finance and nature-related risks
Because, ultimately, we all need to pull together in the same direction if we’re going to tackle this existential issue.
It’s for this very reason that we’re taking strong action to green the entire financial system. It’s a fundamental step in meeting our climate and environmental goals.
Of all global financial centres, firms listed on the London Stock Exchange have the highest sustainability disclosure rate, and the Exchange itself is the first global exchange group to commit to net zero through the Business Ambition for 1.5°C.
London is the leading hub globally for green finance – ranked first in the world, for a third consecutive time, according to the Global Green Finance Index. That accolade has been specifically attributed to the government’s action on sustainable finance.
So what is that action?
We have taken leading action to enable the creation of the global-market-led Taskforce for Nature-Related Financial Disclosures, or TNFD.
We’re one of its biggest funders, but what is innovative about TNFD is that it will afford investors the opportunity to make more investments in nature – helping bridge that $700 billion gap.
The TNFD is on track to publish its final nature risk management and disclosure framework later this year, which will support businesses and financial institutions to assess, manage and disclose their risks, impacts and dependencies on nature and take action.
The UK government remains fully committed to supporting its progress and encouraging market engagement and capacity building through the TNFD’s UK National Consultation Group. And once institutions begin generating decision-grade data and disclosures on their nature related risks, impacts and dependencies, we expect to see the investment start rolling in.
We were also the first country in the world to commit to mandatory Taskforce on Climate-Related Financial Disclosures, or TCFD, across the economy. These rules have now been introduced, with the rules and guidance for publicly quoted companies and large private companies coming into force by April 2022.
We can’t just stop there. We plan to build on TCFD requirements with new economy wide Sustainably Disclosure Requirements, or SDR, which will see businesses reporting on how they impact and are impacted by climate and the environment. SDR will also incorporate the global baseline standards for sustainability reporting being developed by the International Sustainability Standards Board.
And, as committed to in the first Green Finance Strategy, we have mainstreamed climate change into the work of the UK’s financial regulators. This is resulting in real action. Just last year, the Bank of England published its pioneering climate scenario exercises to assess the resiliency of the financial system to climate-related risks.
It is this action that has led London to become a leading hub for sovereign green bonds globally, with issuances totalling more than £10bn from worldwide issuers, including from Chile, Egypt, Mexico, Hong Kong and Fiji – channelling billions into the green revolution globally. The UK government will have raised a total of £26 billion in green gilts by the end of this financial year, having launched its Green Financing Programme in 2021.
That’s huge sums of money being made available through green finance, which itself is being fuelled by our actions. But, as ever, there is much more to do.
We in Government are up for that challenge.
I want to share a reflection before I close.
It’s that it is impossible to know what the consequences of nature and biodiversity loss will be for humans.
But we do expect that life will become harder, that food could become scarcer, and wildlife rarer.
And we do know the clock is ticking down to the point of no return.
If we want to leave this world in a better place than we found it, we have to take action today. History would judge our failure harshly.
But I believe, if we pull together, we can overcome the challenges and ensure our children and grandchildren inherit a thriving world. Thank you.