Investors worth £1.5trn call on Rishi Sunak to provide long-term clarity on net-zero policies

A group of major investors representing £1.5trn in assets under management has called on Prime Minister Rishi Sunak to deliver clear policy signals for the net-zero transition, warning that recent wrangles over electric vehicles (EVs) and oil and gas licenses are threatening investment opportunities.

Investors worth £1.5trn call on Rishi Sunak to provide long-term clarity on net-zero policies

Image: Parliament Live TV

Fresh off the back of more political uncertainty stemming from the Government’s lack of long-term planning over key climate issues like housing decarbonisation and transport, investors have expressed “concern” at the current state of green policy.

The group of 36 financial institutions has been convened through the UK Sustainable Investment and Finance Association (UK SEF) and includes Jupiter Asset Management, Scottish Widows, Aegon, and Royal London.

The investors warn that without long-term clarity on key sectors that are expected to decarbonise, they are unable to make the relevant investments to help support the net-zero transition.

“As investors and financial institutions, we need confidence in the government’s long-term commitment to this agenda to allow us and our investee companies to make multi-billion-pound investments in the UK’s sustainable economy of the future. We have concerns that recent events and signals risk eroding this trust, potentially delaying net zero-related investment,” the letter states.

“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. We urge you to ensure that the UK remains at the forefront of the global transition to net-zero, and to take full advantage of the short and long-term economic benefits that this will bring.”

Under the Climate Change Committee’s guidance for the Sixth Carbon Budget, published in 2020, it was estimated that investment into low-carbon sectors “must scale up to £50bn each year to deliver net-zero, supporting the UK’s economic recovery”.

The CCC’s most recent progress report to Parliament warned that the UK is not on track to achieving its 2050 goal and has strayed further from an affordable, well-managed transition in the past year due to political U-turns. In July, for example, Sunak gave the go-ahead for more than 100 new oil and gas field licenses, while the UK’s electric vehicle (EV) mandate has also been brought into disrepute by some MPs and media organisations.

The investors have warned the Prime Minister that these levels of investments are at risk unless long-term political clarity can be delivered. The letter calls for important policy pillars that would drive investments, including carbon pricing mechanisms, policies that shape the EV transition and legislative frameworks that improve energy efficiency standards for housing. Crucially, the investors demand that policies in key areas are not “changed abruptly”.

UK SEF’s chief executive James Alexander said: “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.”

Legislative legwork

Sunak and his team have been warned time and again in recent months that investors looking to back green technologies are most likely to consider the EU, US and China, thanks to a more favorable policy landscape. The UK is not set to ready its own fresh green economy package until this Autumn, but businesses are seeking some clarity in the meantime.

The investors are the latest community to call on Sunak to provide more certainty on the UK’s net-zero transition.

Last month, more than 100 of the UK’s largest businesses urged the Prime Minister to take more of a strategic and ambitious approach to the low-carbon transition, to harness the full potential for social and economic benefits.

Additionally, the Confederation of British Industry (CBI) warned that the UK may miss up to £57bn of economic opportunity this decade without a modern industrial strategy focusing on clean energy and transport.

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