As the largest part of the United Kingdom’s financial system, the banking sector must help mobilize the quantity and quality of finance needed for the country to achieve its goal of a net-zero economy by 2050. This paper examines how can banks can best respond to the social opportunities and risks from the transition to a resilient net-zero economy, calling for banks to see the challenge as an opportunity to renew their social license to operate.

The authors argue that the main way banks can help achieve a just transition is by supporting their customers and clients. This means understanding the requirements of different customer segments (particularly under-served segments), the barriers they face, and the financial solutions that could enable them to succeed in the transition. The authors examine the specific needs and challenges of banks’ customer groups, specifically individuals/households and small and medium-sized enterprises (SMEs). They also emphasize the need for place-based action and suggest that locally rooted banks and financial institutions can help “anchor” transition efforts.

They conclude by emphasizing the need for a policy framework that provides policy and market incentives for financing just transitions and for fostering broader systems innovations. Among other things, these innovations should help establish the necessary capital mix for a zero-carbon economy and address the traditionally risk-averse attitude of financial institutions.