The Conservatives outlined plans this week to establish the first green trading market and individual green ISAs as part of a move to make investments in environmentally sustainable businesses more attractive.
Shadow chancellor George Osborne proposed Green ISAs (GISA), which if implemented would offer a tax-free boost for savers investing in environmentally responsible companies.
Osborne also launched a working group, led by former Norwich Union chief executive Patrick Snowball, to develop a fully costed proposal on how GISAs would work by next year. The group will also explore scope for introducing a tax-free savings allowance as part of the scheme.
Dr Steve Waygood, head of engagement for the Norwich Union SRI team, said that introducing tax breaks on green ISAs would "behave like a quasi-subsidy for green businesses".
"If the measures were to ever come into force, then it should help reduce the cost of capital for green companies," he added.
Under the proposals a new green business standard will be drawn up and firms will have to meet its criteria to qualify for investment through GISAs. Osborne hopes that having to qualify to access GISA investment will act as a "major incentive for companies to curb their emissions and adopt greener technologies and practices", without the need for onerous government legislation.
Waygood highlighted the importance of getting the standard right because if the criteria are too narrow, underlying investments would be too volatile. Conversely, if they are too broad, GISAs could be labelled as "greenwash", undermining their credibility.
Separately, Osborne proposed "the creation of the world's first trading market for companies focused on green technology".
The Conservatives said that this new Green Environmental Market (GEM) would build on the success of the Alternative Investment Market (AIM), which has already attracted a large number of IPOs from emerging cleantech companies.
Osborne said the exchange would "provide new capital and opportunities for green technology companies… and will enable investors to track and invest in green stocks in a simple way".
A working group comprising the London Stock Exchange, the Climate Exchange and stakeholders from leading investors, businesses and the City is now set to develop "detailed implementable proposals" to support the idea, alongside qualifying criteria for companies looking to list on the GEM.
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