Delivering a Net-Zero Financial Centre: Recommendations from UKSIF's Net-Zero Inquiry

UKSIF's flagship report outlining the UK sustainable finance sector’s vision for how the UK can become the ‘world’s first net-zero financial centre’.

Delivering a Net-Zero Financial Centre: Recommendations from UKSIF’s ‘Net-Zero Inquiry’, is a direct response to the UK government’s announcement made at COP26 last year, which committed the UK to the specific objective of becoming the world’s first net-zero financial centre. The report identifies a series of key steps for government, regulators and the financial services industry to adopt to help achieve this vital goal. Specifically, making clear that the UK must continue to lead the way in tackling the climate crisis by ensuring the alignment of financial flows with a net-zero pathway as quickly as possible. This mission has become increasingly pressing in light of stark warnings from the Intergovernmental Panel on Climate Change (IPCC) and others of the need to ensure greenhouse gas emissions peak as soon as possible to tackle the climate crisis.

The report presents a series of measures to drive the systems change necessary to move the sector far more rapidly towards net-zero, and help achieve the UK’s world-leading ambition made at COP26. This includes ambitious recommendations on: transforming the real economy to drive net-zero aligned investing and lending; creating a world-leading ‘green taxonomy’ and sustainability disclosures framework; strengthening investors’ stewardship role in the economy; supporting communities, clients, and savers on the journey to net-zero; and shifting the whole financial sector and economy to net-zero, including parts of the system that have not been prioritised in rulemaking.

UKSIF’s 290+ members represent over £10trn in assets under management (AUM). They have an absolutely critical part to play to advance the rapid decarbonisation of the economy and address many of the pressing social challenges facing the country that are key to delivering net-zero. As well as highlighting priority areas for swift action by government and regulators, the report recognises too the enormous responsibility of UKSIF’s members to contribute to building a sustainable future at the rapid pace and scale that is needed.

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Delivering a Net-Zero Financial Centre - chapter summaries

1. Transforming the real economy to drive net-zero aligned investing and lending

Government should prioritise rapid action on a specific set of sectors to drive forward their decarbonisation, convening a series of ‘clean investment roadmaps’ for priority sectors where policy clarity is notably lacking, adopt a comprehensive carbon pricing system, and deliver a fresh commitment on energy efficiency in homes to tackle the twin climate and ‘cost of living’ crises. More broadly, a ‘net-zero test’ applied across government decision-making can drive the change we need to see in the real economy for finance to reach net-zero.


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2. Creating a world-leading ‘Green Taxonomy’ and sustainability disclosures framework

The UK will need to learn the correct lessons from the EU’s recent experience with its ‘green taxonomy’, ensuring the UK creates a taxonomy based purely on science by avoiding the inclusion of certain natural gas activities. The UK should seriously address wider sustainability issues, publishing a roadmap for the creation of a ‘social taxonomy’ and undertaking a comprehensive response to last year’s report from Professor Sir Partha Dasgupta on ‘The Economics of Biodiversity’.

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3. Strengthening investors’ stewardship role in the economy

The UK should build on the success of its Stewardship Code in the coming years. Separately, we support the principle of a ‘Say on Climate’ advisory vote for shareholders to help investors better scrutinise companies’ decarbonisation strategies. On climate transition plans, these should offer a holistic view of a company’s plans to transition and go beyond a focus on net-zero milestones alone, as important as these are.

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4. Supporting communities, clients, and savers on the journey to net-zero

We continue to back the creation of a UK Just Transition Commission, based on Scotland’s experience, to identify areas for policy action. Among investors, greater recognition needs to be given to a ‘Just Transition’ as part of their commitments on net-zero and comprehensively reflected in engagement activity. Furthermore, policymakers should urgently clarify that ESG issues (both risks and impacts) are a core component of fiduciary duties.

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5. Shifting the whole financial sector and economy to net-zero, including parts of the system that have not been prioritised in rulemaking

We strongly believe ESG data providers should now be brought within the UK’s regulatory perimeter, as ESG data provided by this industry becomes ever more crucial to firms’ decision-making. More robust corporate disclosures will improve the quality of ESG data, and we would like to see unlisted companies start to disclose to the same extent as listed companies including in relation to their climate transition plans.

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