How Climate Change Affects the Finance Industry

Prime Minister Rishi Sunak has been warned of the dangers of not being clear about net zero goals by a number of financial institutions, who all claim it could delay investments. In a recent letter, a group of 36 financial institutions, asset owners, managers and banks - who, collectively, have £1.5 trillion in assets - explained that they needed confidence in the government’s long term commitment to net zero goals. Otherwise, they would be hesitant to invest in the sustainable economy of the future.

All of the companies involved are members of the UK Sustainable Investment and Finance Association, including BT Pension Scheme, Railpen and the Brunel Pension Partnership.

They explain that recent government statements could undermine these investment efforts, especially those focusing on new oil and gas licences.

The letter explains that: "This shift blurs regulatory visibility for investors and risks the ability of the finance sector to make the large scale, transformative investments required to accelerate net zero delivery and unlock growth in the UK.”

 

The UK is the world’s largest net exporter of financial services, and it’s one of the major growing industries in sustainable finance. Without the right policies, financial institutions are unlikely to invest, which could prevent the financial services sector from becoming a global leader in regards to green investment. This could drive a lot of growth and boost emerging financial services, as long as the right policies are in place.

The CEO of UKSIF, James Alexander, explained that there is a lot of competition for private investments in clean industries. Financial institutions need to choose where to invest, and the UK needs to appeal to them. He said: “The UK needs to look both attractive and consistent as a leading destination for sustainable investment.”

Chairman of the BT Pension Scheme, Otto Thoresen, said that the government needs to provide "long term and consistent policy” which “will help drive real investment into the UK economy.”

He went on to say: “Holding sustainability considerations at the core of this will lead to a more prosperous economy, increased growth and job creation which in turn will help secure our members' pensions."

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