This article was first published in the Financial Times.
From the establishment of publicly-owned clean power company GB Energy to Energy Secretary Ed Miliband’s ‘rooftop revolution’ to deliver solar power to millions of UK homes, the UK’s new government has wasted no time putting into practice clean energy initiatives to tackle the climate crisis.
Electricity generated from solar power is expected to more than double by 2028, according to the International Energy Agency.
These initiatives seem to be aimed at raising the private sector’s confidence in business investment in the UK, to bridge the gap between the current levels of investment into the energy transition and what is needed to meet Labour’s goal to eliminate emissions from electricity generation by 2030.
When discussing a roadmap to make Britain a ‘clean energy superpower,’ it is imperative to carefully select the right financial products to enable the effective flow of private capital into sustainable investments.
One example of this is the world’s first regulated sustainable fund regime, the Guernsey Green Fund (GGF) designation, which endorses schemes with the objective of seeking returns for investors, spreading risk, and mitigating environmental damage, with the regime managing more than £5 billion in Net Asset Value.
These regimes not only give fund managers access to trusted sustainability credentials in a market teeming with evolving regulations, but also give investors confidence that their investments align with internationally agreed goals of mitigating climate change such as the Global Biodiversity Framework agreed in the Kunming-Montreal COP.
These investments directly contribute to the development of a resilient, low cost, low carbon power sector which is a key UK policy objective. Specifically, the British Energy Security Strategy has set out a target for the UK to deliver a five-fold increase in the deployment of solar by 2035.
A Frontier Economics report released at the beginning of this year detailed how funds domiciled in Guernsey, like the ones that sit under the GGF regime, align with key UK policy objectives. The report found that Guernsey-based funds currently channel an ongoing £57 billion gross investment into UK-based assets. This £57 billion is distributed across a number of asset types, including infrastructure such as clean power generation assets, generating social value for the UK as well as private returns.
I was honoured to have been involved in showcasing Guernsey’s role as a leading proponent and innovator in the field of sustainable finance to His Majesty King Charles III during his recent visit to the island.
The King, along with representatives from the Sustainable Markets Initiative, met with Michael Bonte-Friedheim, Founding Partner and CEO of NextEnergy Group, to discuss the provision of solar energy in the UK, and Guernsey’s role in funding this.
NextEnergy Group was founded in 2007 with the mission of generating a more sustainable future by leading the transition to clean energy. The group has raised five investment funds and currently manages c.$4bn in the solar sector.
Its flagship fund, NextEnergy Solar Fund Ltd, was established in Guernsey in 2014 to accelerate the growth of the solar sector in the United Kingdom. The fund is a constituent of the FTSE250 index on the London Stock Exchange and owns 100 solar plants across the UK, powering the equivalent of over 300,000 homes yearly with a total installed capacity of 1015 MW.
On the developments made in the solar energy sector over the past decade, Michael said: “Today, we can build solar projects without any form of government support or subsidy. That's a radical change. And the key driver in that has been the industrialisation of the solar sector, where the cost of building solar projects has come down so dramatically that today, it's the cheapest form of power generation.”
The NESF is just one of many hallmark funds demonstrating what Guernsey can do, and is doing, to support the transition to net zero.
With corporations and countries now experiencing climate impacts first-hand, clean energy financing presents a massive potential opportunity for investors as so much growth is needed to meet the necessary goals established by the government. There is still a growing appetite for more bankable projects in the sustainable finance spaces, with natural capital also emerging as an investment theme, this will prove crucial for Guernsey as home of the world’s first natural capital fund designation.
As the world continues to evolve, it is essential for financial centres to use their expertise to contribute positively to the challenges and opportunities presented by climate change. We are proud that we continue to innovate and position Guernsey as a leading international finance centre committed to using our expertise for good.
