Green government: Sustainability wish list for the UK election

Calls for UK to lead shift to transition - or be left behind

The UK is on track for a general election this year, with current Prime Minister Rishi Sunak hinting it will likely take place in the second half of 2024, though he could string out his term until January 2025. Ahead of a flurry of candidate promises, ESG Clarity asked the sustainability sector for its essential ESG policy wish list.

Policy consistency

Andy Howard, global head of sustainable investment at Schroders, is calling for consistency of policy to unlock the investment and reallocation of capital needed to tackle urgent social and environmental challenges, and deliver the longer-term ambitions most political parties have committed to.

“That capital can only flow at the scale needed if financial policy aligns with industrial, economic and environmental policies; if companies that take action are rewarded for doing so, and become more attractive investments as a result,” he said. 

Countries that lead the shift to transition, rather than waiting to be pulled into it, will have opportunities to build economies that are stronger, wealthier and more resilient, Howard said: “The UK has that opportunity – but needs to demonstrate consistency and commitment to delivering it.” A green investment programme would be a valuable signal, he added.

“Regulation can play an important role here,” he said. “For example, we feel strongly the Prudential Regulatory Authority’s (PRA) proposals for Solvency II reform do not work for the investment in renewable energy infrastructure that we need. This is a possible own goal we can avoid.”

The introduction of Long-Term Asset Funds is an “exciting chance” to channel pension money to renewables and other sustainable assets, “but unless we fix the dysfunctional price competition in the defined contribution pensions market, this capital can’t be put to work at the scale needed”, he added. 

Green incentives

The UK could make a “clear sustainability message” by emulating the US and introducing a substantial package of funding and incentives that will accelerate the transition to a clean energy economy, said Paul Hamalainen, director of risk consulting at Mazars.

Green investment and growth require blended funding, and the UK has a renowned financial centre that can channel the much-needed private capital required alongside the public sector incentives.”

Mandated transition plans

Paul Schreiber, senior policy adviser at Reclaim Finance, said the UK needs mandated climate transition plans: “Since COP26, the UK government has been emphasising the need for companies to adopt transition plans. So far, no regulation makes adopting the plans mandatory.”

The UK Transition Plan Taskforce (TPT) has been conducting work to provide the UK baseline for transition plan disclosure that can be seen as an equivalent to the transition plan part of the European Sustainability Reporting Standards (ESRS). 

From this starting point, Schreiber said three things need to happen. First, “make the adoption of a transition plan mandatory”. Second, “use the work of the TPT and supplement it to provide a clear framework for ensuring the quality of these mandatory transition plans”. And thirdly, “establish a supervisory mechanism to ensure the adoption and implementation of these transition plans”. 

The NGO would also like to see a preferential interest rate for sustainable activities, activated by the Bank of England (BoE), as part of the BoE’s climate and net-zero mandate.

Tackle deforestation

Campaign group Make My Money Matter called for an end to the UK financial sector’s links to deforestation “by enacting mandatory due diligence for all financial institutions, and mandatory delivery of the recommendations of the Taskforce for Nature-related Financial Disclosures”.

Like others, it also highlighted the need for a UK net-zero transition plan to provide certainty to investors and businesses, and mandatory net-zero transition plans for large financial institutions and corporates.

Hydrogen support

Debates ahead of the UK general election should encourage private sector investment in renewable energy through committing increased capital and support to meet decarbonisation targets, says Chris Holmes, partner at asset manager Foresight Group.

Hydrogen, for example, is a sector where more immediate and greater policy support would be beneficial – currently, green hydrogen production accounts for less than 1% of the UK’s target for 2025 and, with proportionate and timely measures, we hope to see this gas play a bigger role in our energy mix,” he says.

With interest rates set to stay flat for most of the year, Holmes also hopes to see certain concerns around the supposed costs of building a green and sustainable economy fall by the wayside.

Solar and land use projects

Politicians should be looking more at the importance of multi-functional land use, especially in solar projects, by considering integration when it comes to agriculture and renewable energy, said Hing Kin Lee, environmental impact manager at NextEnergy Solar fund. 

This would include by introducing agricultural incentives that drive the renewable sector in ensuring sustainable land use practices.

Delivering a long-overdue land use framework that considers environmental sustainability, biodiversity and the impacts of climate change, “to aid sustainable growth rather than inhibit development”, is also on Lee’s election wish list.

Investment in solar infrastructure is needed too, said Lee. Politicians should “advocate for increased public investment in solar infrastructure projects to enhance the capacity for renewable energy generation”.

He also wants policies to “encourage the development of solar parks and installations, especially in areas with high solar potential”, as well as “streamlined and standardised” permitting processes for renewable energy projects, to reduce bureaucracy and accelerate the deployment of solar projects.