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Going green: How can we build a low-carbon economy?

Lloyds Banking Group

10 min read Partner content

The transition to a new 'green' economy promises huge opportunities for UK businesses. As we work towards future-proofing our environment, we need a vision that emphasises low-carbon prosperity.

Over the coming decade, the UK economy will experience the biggest transformation for generations, as we fundamentally change almost every aspect of our lives - from the food we eat, and the way we heat our homes, to what we drive, where we work and what we wear.

The transition to a low carbon economy – a ‘green’ economy – will support the UK’s recovery and promote long-term prosperity, while helping to make our planet more resilient and driving inclusive growth.

All eyes are on the UK’s progress and example, with COP26 taking place in Glasgow in November 2021. This moment of international engagement will provide an extra boost to collaboration and action to drive change – but the UK’s own transition will be driven by British enterprise and innovation.

Businesses in the UK are presented with the chance to power the transformation and seize the huge opportunities that green growth and a green economy represents, not just for our domestic market but also globally. Moving to a low carbon economy will see the introduction of new products and services, sparking a green 'multiplier' of growth for businesses and consumers.

Achieving this will not be easy, however. More investment is needed: an estimated £50 billion, comparable to the government’s spending on schools in 2020-211, will be needed every year from 2025-2050 to fund the transition to a green economy in the UK alone2.

Reaching net zero will require significant changes right across the real economy, supported through not only substantial investment in new technologies and economic activities, but also new policies from government and a need for individuals to adjust their lifestyles.

The net zero transition will involve transformation of the UK economy

In 2019, the UK passed legislation that committed to reducing net emissions of greenhouse gases by 100% by 2050. This is essential to meet the goals of the Paris Agreement and limit global warming – but it’s also a mammoth task.

Meeting the 2050 target will require huge change and development in areas such as energy efficiency, renewable electricity generation, and the development of technologies such as carbon capture and storage. At the same time, we will all need to make lifestyle changes to reduce demand for carbon intensive activities.

This widespread change will have a knock-on impact for our economy, with economic transformation needed to accompany the net zero transition. This creates growth opportunities – as well as challenges – for the UK as it emerges and recovers from the COVID-19 pandemic.

The good news is that the UK has made significant progress in reducing greenhouse gas emissions, with emissions falling by 40% between 1990 and 20197. The largest reductions have been achieved in electricity generation and manufacturing: 43% of the UK’s electricity was produced from renewables in 2020, compared to just 3% in 19988.

Transition is a not a ‘one-size fits all’ approach

Reaching the UK’s net zero goal will require a range of measures right across the economy, but this transition will mean varied approaches across the industries:

  • Some parts of the economy will need to adapt their products and processes to reduce their emissions footprint, for example, manufacturing products using cleaner processes.
  • Some existing activity may need to scale up, such as clean energy and transport.
  • In other areas, transition may mean doing less of some things, for example, activity linked to generating fossil fuels.
  • The transition may also drive completely new activities, such as carbon capture and storage, to help extract and contain harmful emissions before they do damage to the environment.

Achieving this transition will require investment and innovation in new technologies, approaches and activities. At the same time, the UK public will need to make lifestyle changes, such as adjustments to how we use transport, how we heat our homes and what we eat. In some cases, there will also need to be legislation to limit certain activities, for example stopping the sale of petrol cars and introducing greener standards for buildings.

Banking on a sustainable SME market

There is a sizeable opportunity for the UK’s small and medium sized business (SME) sector to thrive in the transition to a green economy. This market represents six million SMEs and is the backbone of the UK economy, accounting for more than 99% of the UK’s business population9, while generating three-fifths of the employment and around half of turnover in the UK private sector.

In addition to building an inclusive and sustainable growth post pandemic, SMEs are particularly well placed to benefit from the green economy, as their size allows them to make decisions faster, be nimble and change direction to reflect changing customer demands.

For this business segment, there are three core growth sectors which represent significant opportunities for sustainable investment: homes, agriculture and motor. 

Homes, agriculture and surface transport are collectively responsible for more than a third of the entire country’s carbon emissions, and are areas where we see clear opportunity for growing the green economy.

Here are a few examples of how we are working with our partners to help make the transition to net zero:


  • 11% reduction in UK household emissions between 1997 and 201810
  • £253 billion needed for low-carbon heating and to improve home insulation11
  • 150,000 new jobs could be supported by work to make homes more energy efficient12
Bank of Scotland enables McKernan Homes to increase the energy efficiency of its East Glasgow housing development

Improving home insulation and installing heat pumps present clear opportunities for increasing the energy efficiency of UK homes. Many UK SMEs are pioneering these changes with the support of Lloyds Banking Group.

McKernan Homes, for example, secured a £1.93 million funding package from the Bank of Scotland’s Clean Growth Finance Initiative (CGFI) which provides discounted lending to help firms invest in sustainable projects.

This funding was used to install sustainable measures such as solar panels on the roof, electric charging points in the car park and improved insulation within the 24 flats on its Dennistoun development, in East Glasgow.


  • 8.7% of greenhouse gas emissions in 2019 were from agriculture, one of highest polluting industries in the UK13 

  • 2040 the year the National Farmers Union has said it will help the sector meet net-zero carbon emissions by

  • £41 billion investment needed in agriculture, land use, land-use change and forestry between 2020-205014
Lloyds Banking Group's partnership with the Woodland Trust incentivises farmers to plant more trees

Planting trees and hedgerows on farmland will be vital in the transition to net zero while protecting the biodiversity of the UK’s green space. Lloyds Banking Group’s partnership with the Woodland Trust is incentivising farmers to plant more trees.

Robert Moore, who farms 356 hectares of land in north Lincolnshire, wanted to incorporate native woodland and reinstate hedgerows on the farm, to capture carbon whilst also encouraging more wildlife onto the farm. Mr Moore sought support for this project from the Woodland Trust’s MOREwoods and MOREhedges schemes, which offer farmers up to a 75% reduction in the cost of planting trees, enabled by funding from Lloyds Banking Group. Through these schemes, Mr Moore’s five hectares of woodland and one kilometre of hedging were planted in early 2021, joining the two kilometres of hedging he had planted the previous year.


  • 4% increase in transport emissions generated directly by households between 1997 and 201815

  •  25 million battery electric vehicles expected to be on UK roads in 2035, up from 140,000 in 202016

  • 390,000 public charging points will be needed in the UK by 2035, up from 21,000 in 202017

  • 95,000 UK jobs could be supported by green road transport by 205018

Lex Autolease helps Sky UK to quadruple its electric vehicle fleet year-on-year

Lex Autolease, the UK’s largest fleet management provider, has helped Sky UK more than quadruple its electric vehicle (EV) fleet year-on-year, as the media and entertainment company looks to become net-zero emissions by 2030, two decades ahead of the government’s target.

In 2020, Sky UK introduced 29 pure EVs, and has already added a further 60 this year, with an additional 72 due for delivery later this year, in line with its zero-emissions strategy.

The EV fleet will be used by colleagues across the business, including the Sky News team when filming on location, sales teams, and company managers.

Our role

As one of the UK’s largest financial institutions, Lloyds Banking Group is well placed to support our customers to make a fair and just transition to net zero while seizing the green growth opportunity.

We are a founding member of the Net Zero Banking Alliance (NZBA), a UN-convened, industry-led alliance of 43 banks across the world aiming for net zero emissions by 2050. As the biggest lender in the UK – we finance one in five mortgages, one in ten electric vehicles in the UK and we have 19% of market share for SME lending, which includes farmers and landowners as part of the agriculture sector – we know we can play an active role in helping to address climate change and support the green economy within these important sectors and others besides.

We are supporting our customers to make changes through schemes such as the Lloyds Bank Clean Growth Financing Initiative, which provides businesses with discounted lending for green purposes, and bespoke financing to help companies move to electric vehicle fleets. In addition to providing funding to our retail clients, we are also investing our own capital through green financing. We want to finance a greener future together.

Find out more about our sustainability commitments

Green economy jobs and the need for

Funding isn’t the only challenge in the transition to a net zero economy – securing skilled talent is also critical.

Hundreds of thousands of people already work in the UK’s green economy. The ‘Environmental Goods and Services Sector’, as defined by the Office for National Statistics (ONS), supported more than 400,000 full-time equivalent jobs in the UK in 201819 while the ‘Low Carbon and Renewable Energy Economy’ supported more than 200,000 full-time equivalent jobs in 201920.

There is clear potential for further growth, with government research estimating that 11 elements of the green economy could support 500,000 jobs by 205021. Growth in green jobs will, however, happen at the same time as more carbon intensive activity is scaled back. Training will therefore be necessary to achieve a just transition, easing the impact for displaced workers and prevent skills shortages holding back green growth.

Reflecting on these skills needs has sharpened our focus on just how important this will be in enabling the transition. At Lloyds Banking Group, we are investing in growing our talent and building dedicated teams, while up-skilling our workforce: more than 900 of our business relationship managers have been trained by the University of Cambridge Institute for Sustainability Leadership.

Working with others to move forward

The transition to net zero is not just about addressing the risks posed by climate change. A green economy poses an opportunity for growth, particularly for UK SMEs across three key sectors: homes, motors and agriculture.

As businesses explore these opportunities, their need for finance and support in implementing climate transition strategies will only increase. At Lloyds Banking Group, we are embedding sustainability within our core operations to enable this transition at scale.

This is not a journey we will go on alone. We will only make real progress by supporting our customers, our teams and working together with partners across the economy to power an inclusive, green economy.

Download the report.

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