Pension schemes concerned over government's climate rhetoric

UK asset owners have written an open letter to PM Rishi Sunak stating that, without long-term clarity from government, the £50-60 billion per year of investment required to reach net zero would not happen

UK asset owners, including several pension schemes, have written to Prime Minister, Rishi Sunak, to caution that the government’s recent rhetoric could risk stopping the finance sector from making the investments required to reach net zero and grow the economy.

The open letter, which received support from financial organisations representing £1.5 trillion in AUM, contended that, without long-term clarity from government, the £50-60 billion per year of investment required to reach net zero would not happen.

The letter raised specific concerns that the government's recent public statements and policy signals could be weakening the UK’s climate commitments, 'blurring' regulatory visibility for investors and risking the finance sector's ability to make the large-scale investments needed to push net-zero delivery.

Recent public debates have cast doubt on the UK’s 2030 phase-out of new petrol and diesel cars and 2035 phase-out of gas boilers, while the reforms to the UK’s carbon markets, energy efficiency standards for the private rented sector, and plans to issue new oil and gas licences in the North Sea all cast uncertainty on government’s commitment to climate goals, the letter added.

As investors and financial institutions, we need confidence in the government’s long-term commitment to this agenda to let us and our investee firms make multi-billion-pound investments in the UK’s sustainable economy of the future, it stated.

Specifically, the group spurred the government to provide long-term policy certainty to make sure the country is a global leader in sustainable finance, by making clear that vital policy pillars driving investment, such as predictable carbon pricing mechanisms, the transition to electric vehicles, and enhanced energy efficiency standards for housing, will not be changed unexpectedly.

This, as per the group, would then enable investors to follow suit and channel private capital into new technologies and projects that will decarbonise the country.

Commenting on the open letter, UK Sustainable Investment and Finance Association (UKSIF) chief executive, James Alexander, said: The global competition to capture billions of pounds of private investment in the clean industries of the future is strong. Ministers’ recent remarks are weakening investor confidence and putting the UK’s net-zero head start at risk.

Alexander added: The big financial players are deciding where to invest, and the UK needs to look attractive as well as consistent as a major destination for sustainable investment.