Report: Political clarity key to unlocking ‘enormous’ UK green investment opportunities

The UK can "reap enormous opportunities" by strengthening private financial investment into green infrastructure and projects, with a new Aldersgate Group report noting the "urgent" need for political clarity to unlock more revenue streams.

The Aldersgate Group released it’s “Towards the new normal report” today (12 March) outlining how the UK can overcome barriers that are limiting uptake in private investment into green infrastructure that will help deliver the Government’s intertwined economic, industrial and environmental strategies.

According to the report, up to £693bn in investment into low-carbon infrastructure is required by 2031 in the UK, if the UK Government is to deliver on its Clean Growth Strategy and 25-Year Environment Plan. The UK’s low-carbon economy could grow from 2% of the UK’s GDP today to 13% by 2050 as a result, the report notes.

Aldersgate Group’s senior policy officer Alex White said: “Over the next three decades, the UK needs hundreds of billions of private investment in green and resilient infrastructure to meet the objectives of the Clean Growth Strategy, Industrial Strategy and 25 Year Environment Plan.

“But investment isn’t happening fast enough on its own. Government must catalyse action on green infrastructure investment now to move the financial system towards a new normal if we are to meet our policy goals cost effectively while maximising benefits for UK plc.”

The report, which concludes a one-year research project including interviews with businesses and investors, stresses that a lack of investment to date hasn’t been caused by a lack of available funds or a willingness to invest, but rather a lack of opportunities to do so.

According to opinions collated throughout the report, the welcome publications of the Clean Growth Strategy and 25-Year Environment Plan need to be backed with more policy detail that will create long-term pipelines for infrastructure projects, while binding regulations and fiscal incentives like stamp duty rebates would help drive efficiency improvements in the building stock. One such area where greater granularity would be welcomed is on the £557m Contracts for Difference (CfD) pot.

The report also calls for regulations to be introduced that overcome “short-termism” in the investor sector, such as introducing a legal duty for all fiduciaries to consider environmental and social governance (ESG) risks. A “green supporting factor” should also be explored to help investors back low-carbon projects. Public spending should also be encouraged.

Carbon reporting

One key recommendation of the report is for mandatory carbon reporting rules to be extended to all large companies under the Companies Act, while it should become compulsory to comply with the Task Force on Climate-related Financial Disclosures (TCFD) once businesses have a better understanding of the requirements.

Increasing reporting requirements should be matched by a carbon price escalator, taking effect as coal is phased out in the early 2020s, that raises the price on carbon as decarbonisation efforts accelerate. The report notes that a compensation mechanism for energy-intensive companies may be required.

The Government pledged to set up a Green Finance Taskforce as part of the Clean Growth Strategy. The Committee on Climate Change (CCC) has warned that the total investment needed to meet the UK’s fifth carbon budget is around £22bn annually.

Matt Mace

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