Last year the British government revealed plans to create a huge pool of funding to align the UK’s financial sector with net-zero targets. It was a massive commitment for a sector that, according to a WWF report, emits 1.8 times as much carbon as its country’s 2019 domestic emissions. Then Chancellor Rishi Sunak hoped it would turn the country into the world’s first net-zero financial centre.
Recent reports suggest, however, that government investment will fail to meet the requirements of such a quest. Around £241m worth of green projects relating to green housing were never delivered, as revealed in May. Some politicians said the lack of success in completing green initiatives meant energy-related problems would continue. And following the current governmental upheaval, it’s unclear whether current policies will last.
If the financial sector is to achieve the status of ‘world’s first net-zero aligned financial centre’, it’s going to have to do it alone.
Achieving net-zero without government support
Government subsidies are good at prompting markets and industries to move in specific directions. But they’re also problematic. Sometimes the movement they encourage results in unintended consequences.
Natural market movement is often best, although sometimes slow. And government subsidies will not, and should not, last forever. Eventually, the financial sector will need to figure out how to operate at net zero on its own two feet. Government support might fall short, but we’re going to need to reach the same destination anyway.
The first places banks are looking to improve their sustainability and meet net-zero targets are the portfolios of companies they finance. Special ‘ESG’ funds have been set up across the UK’s private equity firms, allowing investors to fund only those companies that meet specific ESG standards, according to their principles. As governments introduce more regulations, ESG funds will also begin to make more sense from a financial perspective.
The UK’s financial institutions should, however, continue to look to reduce other sources of carbon emissions in their supply chains. The buildings they own and manage should be one of the first places they look.
Demand side response as a solution to high facility emissions
Buildings are one of the financial sector’s most direct sources of carbon emissions, and one of the UK’s biggest emitters.Adjusting a building’s energy use previously required serious input from the facilities managers. If they wanted to use less energy, they would have to manually adjust HVAC systems, for example. But doing this on a regular basis according to the building’s needs would take a lot of time.
That was at a time when the energy supply was consistent. But Russian hostility and the proliferation of renewable energy sources have prompted a massive change in the way we obtain energy. We need to be more flexible about the way we consume it to respond to fluctuations in supply and demand side response (DSR) is the answer.
Technology has now advanced to support that, and a building’s energy consumption can now be adjusted live, according to its requirements. That means buildings can now consume less energy when they don’t need it, reducing both their costs and energy consumption. It allows an organisation to actively reach its carbon reduction targets.
When active, DSR adjusts a facility’s electricity consumption by a small amount for a short period. This helps National Grid ESO to prevent crisis situations, and consequently, they are prepared to pay the participants for their contributions.
This also allows buildings to make use of demand side response incentives. Employing the use of DSR generates an ongoing passive income which can be reinvented or put towards other CSR (Corporate Social Responsibility) activities, to deliver social value. Not only are there rewards for using DSR, but there is no capital outlay required, making the ROI more attractive than most energy-saving measures.
So if the UK is to reach its net zero targets, it is important for businesses not to rely on the government to take complete control. The initial promises delivered at the Cop26 in November 2021, have not been delivered and if net zero is to be reached, then businesses need to take it into their own hands and focus on the benefits of green building.