UK warned over sustainable finance threat

The UK government has been warned it needs to take a more proactive stance to the move towards sustainability if it is to avoid losing billions in green investments.

In a letter to UK prime Minister Rishi Sunak investment managers, banks, asset owners and other financial institutions representing £1.5 trillion in assets under management have warned that the government’s recent rhetoric risks stopping the finance sector from making the transformative investments needed to reach net zero and grow the economy.

The industry has warned that without long-term clarity from government, the £50-60 billion per year of investment needed to reach net zero won’t happen.

A total of 36 financial institutions – all members of the UK Sustainable Investment and Finance Association including Jupiter Asset Management, Scottish Widows, Aegon, and Royal London signed the open letter.

It stated: “We are writing to express concern at government’s recent public statements and policy signals, which risk undermining the UK’s leadership in the clarity, certainty, and confidence of policymaking toward meeting the UK’s commitment to net zero. This shift blurs regulatory visibility for investors and risks the ability of the finance sector to make the large-scale, transformative investments required to accelerate net-zero delivery and unlock growth in the UK.”

The letter continued: “The UK could and should lead the world in sustainable finance, driving capital towards innovative British companies and creating jobs and skills across the country. As the Chancellor set out in his Mansion House speech, the UK must strive to be the best place to start, grow and scale new enterprise, including in cleantech, and leadership in sustainable finance can ensure we have the capital needed to make this a reality.

“We urge the government to provide long-term policy certainty to ensure this objective can be achieved, by making clear that important policy pillars driving investment, like predictable carbon pricing mechanisms, the transition to zero-emissions vehicles, and improved energy efficiency standards for the private rented sector and across the country’s housing stock, will not be changed abruptly. This is essential so that our sector can help drive capital towards innovative British companies and infrastructure, and deliver prosperity across the UK, improving productivity, pay and creating 1.7 million ‘green collar’ jobs.”

James Alexander, chief executive, UK Sustainable Investment and Finance Association explained: “The global competition to capture billions of pounds of private investment in the clean industries of the future is intense. Ministers’ recent remarks are undermining investor confidence and putting the UK’s net zero head start at risk.

“The major financial players are deciding where to invest, and the UK needs to look both attractive and consistent as a leading destination for sustainable investment.”

Otto Thoresen, Chair of the BT Pension Scheme added: “We call on the UK government to uphold its net zero ambition and take meaningful action over the coming years to demonstrate its commitment. Long-term and consistent policy will help drive real investment into the UK economy.

“Holding sustainability considerations at the core of this will lead to a more prosperous economy, increased growth and job creation which in turn will help secure our members’ pensions.”