LSE Grantham Research Institute, the climate change research group, is recommending the creation of a UK National Investment Bank with an explicit sustainability mandate.
The new recommendation follows on from the launch of a new report by LSE 'Financing climate action with social positive impact'. It highlights several across banking operations, both in the UK and globally to help support the goal of net zero before 2050.
These include creating a multi-stakeholder Just Transition Task Force to advise on implementation of new finance policy and expanding the UK impact investment and community finance market as a major tool to deliver sustainability projects at the local level, encouraging regionally-focused financial instruments and institutions.
Polly Billington, director of UK100, a network of local leaders, a member of the report's advisory committee and also a Smart Transport member, said: "A Net Zero Development Bank is an idea whose time has come.
“Green investment will create thousands of jobs, tackle climate change and secure the recovery.
“This is a timely and well considered report which shows how we can fund the route to Net Zero with business and banks taking on a much bigger role in building back better.”
Bob Wigley, chair, of industry trade association UK Finance, said: "In terms of banking and finance, the response to Covid-19 has taught us that we can adapt business practice and service delivery in support of the economy and society in a way – and to a timescale – not previously thought imaginable.
"The recommendations of this report – addressed to both banking firms and government – ask for similarly radical changes to be made in order that the path to a net-zero economy be founded upon a just transition."
"This important report sets out clear steps for how the banking and finance industry can play a central role in delivering this goal through a just transition, and UK Finance commits to acting on its recommendations."
Wigley said banking and finance firms already play an important part in supporting local networks comprising of corporates, SMEs, local authorities, universities and other sources of expertise.
He said that as part of this, UK Finance will continue to work with the Green Finance Institute, as well as other new or repositioned investment institutions, to help mobilise capital in a way that takes account of local community needs.
Wigley is also calling on Government to back the report’s recommendations.