Strengthening the UK’s Sustainable Finance Future: GW4 Sustainable Finance Network’s Response to the HM Treasury Consultation

The transition to a sustainable economy is one of the most pressing challenges of our time. Financial markets play a crucial role in mobilising capital for net-zero initiatives, yet there are still barriers that hinder sustainable investment. As part of its long-term strategy, HM Treasury recently launched a consultation on Financial Services Growth and Competitiveness, inviting input from stakeholders across the sector, including academia. Given the significance of sustainable finance in shaping the UK’s economic future, Dr Xiaohan Xue (University of Bath), on behalf of the GW4 Sustainable Finance Network, saw this as an important opportunity to contribute.

Why we responded

The GW4 Sustainable Finance Network brings together researchers from across the universities of Bath, Bristol, Cardiff, and Exeter to advance collaborative, interdisciplinary research on sustainable finance. The network is committed to addressing the financial challenges of the net-zero transition by developing innovative solutions that integrate environmental, social, and governance (ESG) considerations into financial decision-making.

The HM Treasury consultation provided an opportunity to highlight the academic perspective on the challenges and opportunities in sustainable finance. Since the consultation specifically sought input from academia, it was important for us to engage in this discussion to ensure that rigorous research and evidence-based insights inform policy development. The sustainable finance community is uniquely positioned to provide critical analysis and guidance on how the UK can improve its financial framework to support green investment, enhance market transparency, and align financial flows with sustainability objectives.

Key themes from our response

Our submission focused on three key questions related to sustainable finance (Questions 5.5–5.7). One of the main themes we addressed was the need to tackle the barriers in the UK’s sustainable finance framework. A lack of standardised ESG metrics remains a critical challenge, leading to inconsistencies in sustainability reporting and investment comparability. While the UK Green Taxonomy is a valuable initiative, it requires clearer guidelines and greater alignment with international standards to support market confidence and ensure that green investment is properly classified. Additionally, capacity-building efforts are needed to bridge the knowledge gap in sustainable finance, as many organisations still lack the expertise to effectively integrate sustainability considerations into their financial strategies.

Another key theme in our response focused on the UK’s role in the global sustainable finance agenda. The UK has the potential to take a leadership role in setting global ESG disclosure standards, by working with international bodies such as the International Sustainability Standards Board (ISSB) and the Financial Stability Board (FSB). Strengthening partnerships with international financial hubs can facilitate the development of cross-border sustainable investment frameworks, ensuring that UK-based financial institutions remain competitive in a rapidly evolving landscape. Furthermore, the UK should focus on promoting transition finance tools, such as sustainability-linked bonds and blended finance models, which can accelerate the flow of capital into net-zero projects.

We also explored the opportunities and barriers for the financial services sector in developing products and services that facilitate investment in the net-zero transition. Green finance innovations, including digital technologies like blockchain, have the potential to enhance transparency and efficiency in sustainable investment. Public-private collaboration is essential to de-risk investment in emerging sustainable industries and scale up financial products that support net-zero goals. However, regulatory uncertainty remains a challenge, and there is a need for clearer guidelines and incentives to encourage financial institutions to develop products that align with the UK’s sustainability commitments.

One of the major risks in the sustainable finance is the rise of greenwashing, where financial products or companies present themselves as environmentally responsible without sufficient evidence or transparency to back those claims. This practice erodes investor trust, misallocates capital, and undermines the transition to a genuinely sustainable economy. Our response to the consultation emphasised the importance of strengthening disclosure requirements to ensure that sustainability claims are backed by verifiable evidence.

Looking ahead

By responding to this consultation, the GW4 Sustainable Finance Network is not only contributing to shaping the UK’s sustainable finance policies but also reinforcing the role of academia in driving impactful change. This is just the beginning of a broader dialogue, and we encourage continued collaboration between policymakers, industry, and researchers to create a financial system that effectively supports the transition to a sustainable economy.

We look forward to engaging further with HM Treasury and other stakeholders on these critical issues and continuing our research and outreach efforts across the GW4 universities.

About the GW4 Sustainable Finance Network

Sustainable Finance is about integrating ESG factors into investment decision-making. The goal of sustainable finance is to minimise the environmental impact of business operations while still securing long-term financial returns. A strategic approach to finance and investment is essential for mitigating climate change and advancing the transition towards net-zero emissions. Research in this area is therefore crucial as the region and the UK continues its net-zero mission.

This pioneering GW4 research community aims to serve as a dynamic hub for the region and beyond, uniting key players across the sectors of academia, industry, local communities, and government. It features researchers from both finance and environmental science to create a multidisciplinary approach offering unique research insights.