SCI unveils roadmap to boost R&D investment for net-zero transition

Suggested strategies involve requiring pension schemes to invest in research and development

The suggested strategies involve requiring pension schemes to invest in research and development (R&D) focused sectors and offering tax incentives to large-scale production facilities to generate employment and encourage science commercialisation.

SCI member Johnson Matthey’s chief executive officer Liam Condon said: “Addressing climate change by accelerating the net-zero transition requires both innovation and supportive policy. The SCI has developed a roadmap that can help the UK lead the way, if we move with a strong sense of urgency”.

Last month, the SCI, in partnership with LEK Consulting, released a report warning of potential losses of £230bn in economic growth and 240,000 jobs within life sciences and clean technology in the UK by 2030 without a focused industrial strategy.

Simultaneously, the Chancellor announced the ‘Mansion House reforms,’ which entail an agreement among nine major UK pension providers to allocate 5% of their assets to unlisted equities by 2030.

While the reforms aimed to stimulate investment in sectors with “high growth potential” and long-term returns, the announcement did not establish explicit links between the pension reforms and their specific impact on green investments.

The SCI argues that the Mansion House pension scheme needs to ensure the inclusion of life sciences, clean technology, sustainable materials, and recycling in its investment criteria.

Skidmore Review recommendations

The recommendations from the SCI also build on the recent Skidmore Review, which proposed that the Treasury investigate how tax reliefs could stimulate business investment.

The Skidmore Review, led by MP Chris Skidmore, introduced 129 suggestions spanning various sectors like renewable energy, green finance, and the built environment.

One of the Skidmore Review’s proposals was for the UK Government to consider a replacement for the ‘super deduction,’ a 130% capital allowance for capital spending that ended in March this year.

The SCI’s proposal suggests a new iteration of the super deduction, aimed specifically at investments in environmentally friendly assets. Under this plan, businesses would receive extra capital allowances for eco-friendly investments or emission reductions.

The SCI points out that both the US Inflation Reduction Act and the subsequent EU Green Deal Industrial Plan have highlighted the potential benefits of tax incentives that align with net-zero objectives. These incentives can boost investments while aiding countries in reaching climate targets.

Although replicating the scale of the US Inflation Reduction Act might be challenging due to the UK’s smaller size, the SCI argues that adopting similar tax incentives could fuel growth in science and innovation.

Furthermore, the SCI proposes additional tax credits for investments proven to contribute to the UK’s net-zero transition.