London, Tuesday 19^th March 2024 – The UK Sustainable Investment and Finance Association (UKSIF), which brings together 300+ members managing over £19 trillion in global assets under management (AUM), has today released a report showing that the UK could potentially lose out on up to £31 billion of private investment.

UKSIF polled 100 business decision makers across the UK housing sector, representing £300 billion in turnover, on their views about the current opportunities and challenges of decarbonising the UK housing sector.

The research found that only 15% of UK real estate companies place the UK as the top market for sustainable investments, with 63% of respondents planning to move investments out of the UK to a market that is more supportive of their sustainability goals.

However, improvements in the sustainability policy landscape could see the UK housing sector benefit, with almost all large UK real estate companies considering an increase in investment if this was the case. The respondents identified various factors which could support this further investment drive, including:

• Nearly three quarters (71%) of large UK real estate companies believe that introducing a long-term, CPI-linked rent ceiling for social housing, post-2025, would have a positive impact on companies investing in sustainable real estate in the UK.
• Recognising the multiple participants involved in decarbonsing the UK housing stock, respondents said that if the government collaborated with lenders and brokers to better signpost green mortgage options, it would encourage over half (56%) of large UK real estate companies to increase investment in sustainable housing.
• Over four in five (85%) of UK’s large real estate companies also said that they believe skills training hubs to reduce heat pump installation delays would have a positive impact on companies investing in sustainable housing in the UK.

The UKSIF Financing the Future: Housing Report is the second of a four-part series of research and policy papers calling for a series of practical and cost-effective policy reforms required to unlock greater investment for the UK’s highest carbon-emitting sectors and fulfil the UK’s true potential for sustainable economic growth.

Within the report, UKSIF has identified three key measures required to unlock the private capital needed to decarbonise the UK’s housing stock, including:

1. Set a requirement for private rented homes to achieve an EPC rating of C by 2035
   • Widespread retrofitting including new skills hubs, and the rollout of heat pumps will help to significantly reduce the UK’s carbon emissions and save £8 billion in energy bills over the next decade.
2. Increase green mortgage take up
   • The FCA should adopt a clear definition of green mortgages to better align market products. This could include developing a lenders’ charter for green mortgage providers or encouraging lenders to offer their green mortgages to any home that has an EPC rating of C and above.

3. Secure longer-term rent settlements for social housing providers to support them to retrofit and decarbonise
   • Funding remains the biggest barrier for social housing providers to retrofit their housing stock. Introducing Capital Allowances for private investors to invest in the sector can help decarbonise the UK’s housing stock more efficiently.

James Alexander, CEO at UKSIF comments: “Successive governments’ wavering on decarbonising the UK’s housing stock has hampered private investment into one of the UK’s highest emitting sectors. Our research shows that there is huge demand from real estate companies and investors alike to invest in the UK, but policy reform and government measures to close the skills gap are critical if the UK is to avoid falling behind other countries in the race for capital. 

UK residents can live in greener houses that are cheaper to heat as long as policymakers remain focused on the critical role of private investment in  the transition. Investors are in desperate need of clarity from the government on sustainability policy, and only then can opportunities be unlocked for the UK housing sector, with benefits realised for consumers, the environment and the wider economy.”

Chris Taylor, Head of Real Estate at Federated Hermes, comments: “It is critical that we take immediate steps to unlock the private capital needed to decarbonise the UK’s housing stock and achieve our net zero ambitions. The scale and complexity of this challenge demands a tailored approach that considers the unique characteristics of the sector and supports the role of private investment in driving this transition.

By its nature, the UK housing market is highly fragmented with a large number of stakeholders, including homeowners, developers and social housing associations, which makes it challenging for private capital to scale up potential solutions. Therefore, we need a joined-up approach with the creation of appropriate mechanisms and legislative frameworks, as well as well-defined, interim targets and long-term policies to facilitate and encourage private investment in the decarbonisation of UK housing.

Political certainty will be vital to providing investors with the confidence needed to invest long-term, patient capital into major new residential developments. Whichever government succeeds in winning the forthcoming election will hopefully grasp the importance that private investment plays in delivering relevant and resilient residential projects, aligned to the country’s decarbonisation goals.”

Tim Lord, UK Head of Climate Change, HSBC UK, adds: “We need to unlock investment to retrofit almost all of the 28 million homes in the UK – and if we get it right we can cut emissions, increase comfort, and reduce running costs. At the moment, the upfront costs of measures like replacing gas boilers with green alternatives, installing solar panels, and upgrading insulation can be challenging for households to meet. We need to create the right incentives for householders to invest.”

In response to the Spring budget announced by the chancellor in parliament today, CEO James Alexander, issued this comment on behalf of UKSIF.

“The Spring Budget included several proposals designed to cajole UK savers and the financial services industry into investing more in the UK. Forcing pension funds to disclose rates of UK investment, or increasing the ISA allowance for investment in British firms, fails to resolve the policy barriers driving private capital abroad, particularly in sustainable industries, which are our biggest source of future growth. Our members are clear that the answer to unlocking billions more in private investment lies in demonstrating policy certainty and ensuring the UK has high-quality investable projects with long-term growth potential.

UKSIF is pleased to see that the government’s spring budget includes planning and grid connection reforms which we have been calling for several years as a measure that will help to drive private investment into the UK’s clean energy industry. Our Energy report, released in late February, clearly shows that planning wait-times and insufficient grid connectivity has driven as much as £115bn in private investment overseas. Points 5.83 to 5.85 of the budget’s red book demonstrate a will for crucial differentiation in planning permission timelines to speed up Nationally Significant Infrastructure projects such as wind farms, which will ultimately lower household energy bills and drive the UK’s net-zero transition.

The chancellor has announced that this government is due to deliver one million new homes this parliament. We would urge the government to consult with industry to ensure that all subsequent new homes are built with net-zero in mind, so that they will not require expensive retrofitting in the near future. The housing sector is among the UK’s biggest emitters, and the UK has a golden opportunity to expand its housing stock in a way that saves people money on their energy bills while progressing towards our legally binding net-zero targets.

Tight public finances make it all the more important for the UK to take policy measures to attract private investment into sustainability projects. In order to compete with the US’ Inflation Reduction Act and the EU’s Green New Deal, the UK must remove the barriers which are currently driving private investment overseas in major growth areas of the future such as wind farms, hydrogen fuel, and EVs. The UK has a clear choice, to seize the golden opportunity within reach to become a green superpower, delivering highly skilled jobs and billions in investment, or to be left playing catch up.”

For press enquiries, please contact Media@UKSIF.org

London, 26^th February 2024 – The UK Sustainable Investment and Finance Association (UKSIF), which brings together 300+ members managing over £19 trillion in global assets under management (AUM), has today released a report showing that 63% of UK energy companies have moved, or plan to move, investments out of the UK to a market more supportive of their sustainability goals. Furthermore, failing to implement new favourable policies could see the UK fail to benefit from a potential £115 billion of investment which is waiting to be unlocked for the UK energy sector.

The UKSIF Financing the Future: Energy Report is the first in a four-part series of research and policy papers calling for a series of practical and cost-effective policy reforms required to unlock greater investment for the UK’s highest carbon-emitting sectors and fulfil the UK’s true potential for sustainable economic growth.

As part of the research, UKSIF polled 100 business decision makers across the UK energy sector, representing £700bn in turnover, on their views about the current opportunities and challenges of decarbonising the UK energy system. Nearly nine in ten (87%) of UK energy businesses agreed that changes to UK policy are essential to make the UK an attractive investment location for green energy.  Moreover, 81% of large UK energy companies agree that the UK is falling behind other countries in the race to become the most investible market for low-carbon energy.

Within the report, UKSIF has identified three key measures required to facilitate greater investment and faster delivery of the UK’s future energy infrastructure, including:

1. Overhaul planning rules to remove obstacles and reduce the time taken to bring large energy projects online
   • Streamlining the consenting process and shortening decision timelines could lead to 40% of energy companies increasing their investment in sustainable energy in the UK.
2. Ensure there is adequate grid capacity to reduce connection times
   • Enabling the regulator to permit greater private sector investment will help rapidly build out the grid and associated infrastructure, allowing a greater number of low carbon projects to be invested in and connected.
3. Reform energy pricing mechanisms to incentivise long-term investment in UK low carbon power capacity, including the Contracts for Difference (CfD) auction process to better support UK supply chain investment
   • Reforming the parameters of CfD auctions will not only boost investment into the UK, but also ensure that renewable energy supply chains are scaled up significantly – as will be required – to meet renewable deployment targets in the late 2020s and 2030s.

James Alexander, CEO at UKSIF comments: “An international race is underway between countries to become the most investible market for green energy and, currently, the UK is taking its leading position for granted. Multiple decades of arcane and archaic planning rules are putting the UK energy transition in great jeopardy. This report highlights the abundance of private capital that is waiting to be deployed to close the funding gap and help accelerate the UK’s energy transition, with companies clearly showing that they are willing to take this investment elsewhere if policy does not evolve.

“We are calling for practical and cost-effective measures that will advance the transition to a green economy and bring direct benefits to both consumers and the UK economy. Not only do we see no excuses not to accelerate these, failure to do so limits the UK’s growth potential, will continue to cause costs to consumers and threatens the UK’s position as a world leader in green finance and the undisputed financier of the net zero transition.”

Read the full press release at the link below:

Today, the Financial Markets Law Committee released their report on the consideration of sustainability factors and risks associated with climate change within the fiduciary duties of pension trustees. You can read the report here:

Pension Fund Trustees and Fiduciary Duties: Decision-making in the context of Sustainability and the subject of Climate Change

In response to the guidance, James Alexander, CEO of UKSIF commented as follows:

“The guidance which has just been published by the Financial Markets Law Committee (FMLC) delivers much needed clarity on fiduciary duty, which UKSIF has been requesting for a long time. There has been confusion for some time over how far environmental, social, and governance (ESG) risks and opportunities should be considered on behalf of beneficiaries. This guidance sends a clear message that ESG risks, and particularly climate change, present serious financial risks that should be considered by fiduciaries as part of standard investment practice, taking long and short-term investment horizons into account.

“This guidance states that it is simply good financial sense to consider sustainability, breadth of impact, and the long terms outlook of investments. We anticipate that this guidance delivers the clarification necessary to make fiduciary duty legislation much more effective in its purpose. We urge ministers and regulators to support the findings of the FMLC and continue to monitor the impact of these clarifications amongst fiduciaries and their advisers.”

UKSIF welcomes the Shadow Chancellor Rachel Reeves’ comments at the Labour Party’s 2024 Business Conference, reaffirming her party’s ambition to attract private investment at scale to finance the UK’s green transition.

Reeves committed to “governing [sic] as a pro-business party” and described financial services as “a national asset to be championed”, noting the ambition of Labour’s proposed National Wealth Fund to attract £3 of private capital for every £1 of public investment. She recognised the importance of regulatory reform in the wider economy, too, committing to a “once in a generation overhaul of our planning system”. Reeves also highlighted the potential for the City of London as the global hub for green finance, creating jobs in financial services across the UK while financing the world’s transition to net zero.

UKSIF Chief Executive, James Alexander, said: “The Shadow Chancellor rightly recognises the potential for private capital to finance a significant portion of UK’s transition to net zero, as well as the huge opportunity for UK leadership in sustainable finance around the world. The Labour Party should continue to focus on key regulatory reforms – as well as public funding where appropriate and sufficiently catalytic – to ensure the UK would compete with the US, EU and elsewhere in the global race for green investment, and the growth, jobs and rise in living standards which inevitably follow”.

The Labour Party has today published its plan for financial services, Financing Growth, echoing many key recommendations made by UKSIF, the UK’s leading member organisation for sustainable investment and finance.

The report, authored by Shadow Chancellor Rachel Reeves MP, and Shadow Economic Secretary to the Treasury Tulip Siddiq MP, commits to delivering a world-leading green finance regulatory framework: advancing a science-based UK green taxonomy; fulfilling the UK’s commitment to Sustainability Disclosure Requirements aligned with the International Sustainability Standards Board; and requiring financial institutions and major companies to publish transition plans, aligned with the Transition Plan Taskforce disclosure framework.

It also makes several commitments which could strengthen the role of private capital in greening the wider economy, including expanding the offering of green mortgages, potentially to include options to finance retrofitting work, as well as empowering the British Business Bank with a more ambitious and targeted remit.

“We’re pleased to see the Labour Party recognising the importance of securing the UK’s leadership position as a world leader in green finance. Highlighting the potential of green mortgages and financing models for retrofitting also recognises the vital role of private capital in greening the wider economy. Implementing key commitments in the UK’s Green Finance Strategy, while taking a strategic approach to the role of private finance in the UK’s wider green transition, are key to fully realising the potential of sustainable finance in UK growth going forwards.” comments James Alexander, Chief Executive of UKSIF.

The Labour Party has today published its report into Business Relations, featuring several key recommendations made by UKSIF, the UK’s leading member organisation for sustainable investment and finance.

The report, authored by Iain Anderson, Founder and Executive Chairman of H/Advisors Cicero, echoes UKSIF’s calls for reforms to current pathways to inward investment, as well as more open communication routes between government and potential investors.

“We were pleased to contribute to this report, comments UKSIF Head of Public Affairs and Communications, Joe Dharampal-Hornby. “Strong partnership between government, investors and businesses is critical to delivering sustainable economic growth as the UK transitions to net zero.”

Among the recommendations included in the final review, the following were directly recommended by UKSIF:

1. Structures for engaging with business must avoid becoming talking shops; they should have a clear purpose and be task oriented.
2. A more diverse range of business voices from across the country should be able to engage with government. Diverse membership of engagement bodies is necessary to get a representative view of UK business’ challenges and opportunities. This includes improving engagement with SMEs.
3. There should be fewer government reshuffles, including at the lower ministerial level, where the political impact is less clear but the detrimental impact on business relationships and policy expertise remains.
4. The process for attracting inward investment requires reform.
5. There should be a transparent, well defined pathway for potential investors and companies to engage with government.

UK Sustainable Investment and Finance Association (UKSIF) has issued a response to GC23-3: Guidance on the anti-greenwashing rule.

UKSIF had an extensive involvement in the development of the FCA’s sustainability disclosure requirements regime (SDR), the final form of which was released by the FCA on 28 November 2023. The clarification and expansion of the sustainability disclosure regime is integral to the UK’s aim of becoming a world leader for green and sustainable investing, and SDR is a key milestone for this.

UKSIF is the leading membership body for sustainable finance in the UK, representing over 300 members managing £19tn in global assets under management.

In a press statement, UKSIF Chief Executive, James Alexander, said:

“Greenwashing poses a serious threat to the long-term goal of real sustainability. We are pleased to see the FCA recognising the threat of greenwashing as comparable with other forms of marketing disinformation. We welcome the FCA’s comprehensive approach to providing guidance on what constitutes greenwashing, so continue to support the FCA to make sure this rule is both effective and implemented fairly, in order that firms can get behind it and seek to play by the rules enthusiastically.

It’s vital that investors consider the full range of environmental and social risks to investments. We are fully supportive of the FCA’s efforts to impose a fair set of standards to root out exaggerated and misleading claims, which both fail to meet consumers’ preferences, and fully consider the risks to investments.”

UKSIF has welcomed Sir Keir Starmer’s recognition of the role that private investment can play in helping the UK decarbonise its energy sector.

UKSIF is the leading membership body for sustainable finance in the UK, with over 300 members managing round £19tn in global assets under management.

James Alexander, Chief Executive of UKSIF, said:

“We welcome Labour’s recognition of the vital role that private investment can play in helping to decarbonise the UK’s energy sector and reach its net zero ambitions, catalysed by government action.

“We urge Labour to hold firm on its commitment on £28bn of green investment annually by the second half of the next parliament, as well as its proposed reforms to the planning system.

“Targeted government investment, combined with supply-side reforms, is key to unlocking greater levels of private capital to accelerate green growth across the UK.”