LCAW: Sustainable investors welcome plans to ‘future-proof’ UK economy

The sustainable investment industry has said the UK has an opportunity to regain its position as a leader in transition planning, following a string of announcements at London Climate Action Week.

Last week, the government published three consultations on the topic of sustainability disclosures. These include:

A consultation on adopting the International Financial Reporting Standards (IFRS) sustainability reporting standards to create UK Sustainability Reporting Standards (UK SRS).
A consultation on introducing climate-related Transition Plan (TP) requirements.
A consultation on developing an oversight regime for the assurance of sustainability-related financial disclosures.

The Net-Zero Delivery Summit at London Climate Action Week also highlighted the UK’s ambition to scale transition finance markets to potentially $1trn by 2030, signalling opportunity for asset managers.

First mover

The UK was considered a first mover on transition planning and was the first G20 country to mandate TaskForce on Climate-related Financial Disclosures (TCFD) reporting for large companies and financial institutions, starting in April 2022. However, since then, there has been criticism net-zero pathways and transition planning has fallen by the wayside for the government agenda.

Last week, the government’s announcements, which included how the UK will adopt the IFRS as outlined by the International Sustainability Standards Board (ISSB), are said to be the next steps in strengthening the UK’s attractiveness as a destination for sustainable finance.

Kate Levick, associate director – sustainable finance and resilience at E3G, commented: “The UK was the first mover internationally on transition plans, but other jurisdictions are moving fast with concrete actions. The UK now has an opportunity to regain the market lead by taking steps to bring in robust requirements building onthe ISSB’s international baseline. The financial opportunity is huge, and the UK must move at pace to seize it.”

Her colleague Heather McKay, programme lead – UK sustainable finance and resilience at E3G, added: “The delivery of the government’s growth mission relies on ensuring Britain is a world-class destination for green and transition finance. The clean economy is our ticket to a high-growth future, and credible transition plans – as part of a future-fit regulatory regime – are fundamental to unlocking the investment required to seize this opportunity. The release of this highly anticipated consultation package is a welcome step towards turning this vision into reality.”

Clean economy

Energy secretary Ed Miliband (pictured left) also outlined the government’s “clean energy superpower” mission, aiming to achieve 95% low‑carbon electricity by 2030, reduce bills, boost domestic energy security, and green‑grow the economy.

He announced the lifting of the onshore wind ban, a renewables auction (with over £1.5bn budget), and a Clean Power 2030 Mission Board, chaired by ministers to ensure deliver.

“Our mission is to make Britain a clean energy superpower by accelerating to net zero across the economy,” he told the conference, which is attended by more than 45,000 delegates.

Combining the sustainability case with the need for energy security he added: “Every wind turbine we block, every solar farm we reject, every piece of grid we fail to build makes us less secure and more exposed.

“My message today is we will take on the blockers, the delayers, the obstructionists, because the clean energy sprint is the economic justice, energy security and national security fight of our time.”

ShareAction was pleased to see this commitment, with head of UK policy Fergus Moffat commenting: “We welcome the UK government’s commitment to sustainable finance and clean energy superpower mission, which should help to drive down energy costs for working people and future-proof our economy.”

Mandatory transition plans

The transition plans are also “a vital link in the chain for turning climate promises into action and moving companies towards a greener, fairer and more prosperous future for Britain”, Moffat added.

“Climate change is already hitting the UK hard – from devastating floods to scorching heatwaves – and yet banks and major polluters are still dragging their feet. We urge the government to make transition plans mandatory to set clear expectations for companies, including our sizeable banking sector, to plan for the inevitable transition in a timely way.”

Meanwhile, James Alexander, CEO of UKSIF and member of the PA Future Committee, said: “We welcome the government’s commitment to bringing forward the consultation on climate transition plans for banks and large companies.

“These are essential for enhancing growth and global competitiveness as the UK and other countries decarbonise. They can also give industry leaders valuable insights into their business’s long-term resilience, guiding strategic thinking.

“Further dialogue between the government and industry on the UK Sustainability Reporting Standards, which would align the country with international reporting practices, is also very encouraging.

“We look forward to ministers taking forward these commitments, which will help future-proof our economy over the coming years.”