June 12, 2019 / News

Investors key to UK’s 2050 zero carbon target

By Joe McGrath, ESG Clarity

Investors have welcomed the UK government's ambitious environmental plans

Investors key to UK’s 2050 zero carbon target

Environmentally conscious investors will be key to delivering the UK government’s commitment to cutting greenhouse gas emissions to zero by 2050, fund managers say.

On Wednesday, UK Prime Minister Theresa May pledged to cut greenhouse gas emissions in the UK to nearly zero within 30 years, making Great Britain and Northern Ireland the first major nation to propose such an ambitious target. The proposal will include an amendment to the Climate Change Act 2008.

However, fund management groups warned that the plans are not currently supported by sufficient investment to meet this target.

“The government’s decision to target net-zero carbon emissions is another important step forward. Yet how this can actually be achieved remains the elephant in the room,” said Matt Setchell, co-head of Octopus Energy Investments.

“While the pathway remains unclear, it is vital that investment continues to flow into areas that have already had a material impact on the UK’s decarbonisation. The UK currently lacks the required investment to deliver on this 30-year goal, but investors have a key role to play in unlocking the capital needed to reach net-zero carbon emissions.”

Setchell said that it will be important for the government to encourage investors to consider environmental factors in future regulations, if this ambitious target is to be achieved.

He added: “It is essential that, along with setting new targets, the UK government maintains a supportive regulatory environment to encourage investment into preventing climate change. Setting targets alone will not incentivise investment.”

Despite these observations, investors were broadly positive on the bold step taken by the UK Prime Minister.

Neville White, head of responsible and sustainable investment at EdenTree Investment Management, described the decision s ‘groundbreaking’.

“As investors, we understand the role business can play in helping to progress the necessary transition to a low carbon economy, as well as the challenges in decoupling economic growth from rising emissions.

“We view climate change and making our planetary home habitable for generations to come as perhaps the greatest challenge facing the current generation. To that extent, investors can and must play a visible role, working with business and industry progressively to decarbonise towards a stretching net zero target.”