© Jessica Davies/DCT Media 
Transition Finance Council policy chair Chris Skidmore has warned of an “investment gap” on the road to decarbonisation.
Skidmore said that, as industries move onto the next phase of the UK’s clean power targets, new mechanisms will be needed to fund the energy transition.
“The next phase of policy is to close these gaps, to identify where they are, and to practically find solutions,” he said at the Clean Power 2030 summit in London.
Identifying investment gaps will help ensure that London can be a global leader in financing the energy transition both at home and abroad, according to Skidmore.
The former minister for energy and clean growth said it is important for financiers to speak the same “language” as the project sectors in order to implement the energy transition in the real-world economy.
He said companies must also be given the tools to work alongside the financial community.
At present, he described the technology and finance sectors as “two worlds’ working independently that do not “communicate” well with each other.
Part of the latest policy work by the Transition Finance Council is to give industry and the finance sector “the tools to work on all sides” of the energy transition, he said.
“We have sectors that are putting together transition planning, they’re putting together prospectuses about what they can deliver,” Skidmore said, adding that implementation will involve planning and matching up processes that can be followed to attract investment.
The council launched a “sector agnostic” call for evidence last week at the Climate Action Week.
“What we’re looking to do is both fighting the transition barriers that you yourselves coming up against in trying to attract investment, but also to understand what has worked, all the processes, [and] working with investors that are able to unlock transition finance,” he said.
Skidmore explained that financial industries need to understand how to derisk, invest in and identify rewards in decarbonisation.
‘Turn green over time’
The former UK energy and clean growth minister said companies are now looking at how to “invest in these brown industries and turn green over time”.
This aspect of the energy transition is a focus of Skidmore’s work as part of the Transition Finance Council.
When he carried out the Net Zero Review, Skidmore spoke to councils and businesses and held round tables across the country.
As part of that work, he said there were “hundreds of projects, if not thousands of opportunities to decarbonise existing facilities to reduce emissions”.
Despite a plethora of decarbonisation opportunities, he said that “very few of these projects were categorised as being investable”.
The council was established by Chancellor Rachel Reeves during the Mansion House speech late last year.
Alok Sharma, former COP26 president, chairs the Transition Finance Council, which was launched by the City of London and government to drive recommendations from the Transition Finance Market Review.
“Obviously, there’s been a lot of work that’s been taken forward on transition finance in the past,” Skidmore said, emphasising that now is the time to advance the clean power roadmap.
The Transition Finance Market Review, led by Vanessa Harvard-Williams who now leads the council’s first working group, recommended that new benchmarks be set up for energy transition finance. Another recommendation was “transition planning”, which the council is now working with companies to implement.
The council is also working with the financial sector to establish key standards for financiers to “agree over what is best in class around transition finance”, Skidmore said.
The council runs a third working group focused on best practice and scaling up best-in-class technologies. The working group includes asset owners, asset managers, pension companies, National Grid and a number of energy companies, such as SSE, Skidmore said.
“We’ve been working on where can we make the greatest difference in the shortest amount of time,” he said, adding: “The Transition Finance Council won’t be around forever. It has been given first year and potentially a second year to come up with mechanisms to unlock transition finance.”
