Monday, May 20, 2024

UK at risk of losing sustainable investment ranking

Must read

A new report has indicated that the UK is in danger of losing its pole position on the Global Green Finance Index.

Over two thirds (69%) of businesses agreed that lack of certainty over sustainability policy and regulation is limiting this type of investment in the UK, according to the UK Sustainable Investment and Finance Association (UKSIF) Financing the Future: Financial Services Report.

The report also found that 65% of businesses have already planned to move investments out of the UK to a market that is more supportive of sustainability goals.

However, 83% said that the UK is still seen as the top market for sustainable finance activity.

UKSIF is calling on the government to take action to reverse this trend by the implementation of a number of policy measures.

Additionally, the report found that 95% of businesses would increase investment in the UK, either through new projects (40%), existing projects (34%) or both (21%), if favourable policies are implemented. From those surveyed in the UKSIF report alone, this would represent £100bn AUM.

There are three key policy shifts required to move the UK financial system towards improved sustainability, according to UKSIF.

The first is delivering a clear and world-leading sustainability disclosure regime. This includes mandatory corporate transition plans and a UK green taxonomy, as 68% of financial companies agree that the Sustainability Disclosure Requirements (SDR) will be helpful in increasing sustainable investments.

Secondly, the UK must empower investors by clarifying the fiduciary duty of pension schemes, which includes calling for investment consultants to be brought under the formal Financial Conduct Authority (FCA) regulatory scope.

The Pension Regulator (TPR) should also make it clearer to pension schemes that factoring in environmental, social and governance (ESG) issues, and actively managing associated risks and impacts, is consistent with fiduciary duties.

Finally, the UK must embed biodiversity into the regulatory framework to fulfil its commitment to halt nature loss by 2030 and meet international commitments. This would alleviate pressure on policymakers and regulators, and broaden their focus beyond climate-change risks alone.

A new biodiversity-specific standard would also better support financial-services firms and companies in the UK, globally address the financial risks posed by damage to the world’s biodiversity and reduce the economic impact on Gross Domestic Product (GDP).

UKSIF chief executive James Alexander said: “The UK is facing a crucial inflection point that could see it either close the remaining gaps and benefit from the great strides we have taken in our global leadership on sustainable finance to date; or lose its hard-won position as a leader.

“The recent flipflopping on wider sustainability policies, continued absence of detailed policy frameworks for various sectors, alongside secondary factors such as a lack of clarity from policymakers in creating a clear and stable financial services regulatory framework, is helping drive away much-needed private capital into the UK that can help progress the country towards net zero.”

To obtain these results, UKSIF surveyed 400 business decision makers within large companies in the UK.

Latest article