Step-change needed by UK government to deliver on climate targets

The UK government has committed to publishing its overarching net zero strategy ahead of the COP26 summit taking place in Glasgow this November. The strategy will outline how the UK intends to meet its net zero commitment, and we anticipate it will define the pace and level of change needed to achieve that commitment. 

According to the Climate Change Committee (CCC), existing policies put the UK on track to deliver just one-fifth of the emission reductions needed by 2035. Progress in ambition has been made over recent months, with significant developments including the publication of the government’s strategy on transport decarbonisation as well as commitments to dates for coal phase-out in the power sector.

However, further detailed policy commitments are still needed to demonstrate how delivery will be scaled up to put the UK on a credible pathway to net zero.

Investors united on what a credible strategy looks like

In this context, the investors that we represent at The Institutional Investors Group on Climate Change (IIGCC)  – the European membership body of investor collaboration on climate change and voice of more than 330 investors with more than €39 trillion in assets under management, acting for a prosperous, low carbon future – welcome the fact that the UK government has committed to publish its strategy imminently.

We are hopeful that it will continue to demonstrate the level of ambition highlighted in the updated Nationally Determined Contribution (NDC) and will provide a clear, integrated, and detailed roadmap for achieving net zero emissions, with policy incentives for achieving those pathways. This will require increasing the level of ambition and detail within existing sector strategies, as well as sharing details of those still to be published, such as the heat and buildings strategy. 

Clear sectoral transition pathways from the UK government would support understanding on the transition for a range of parties, and in turn would accelerate deployment of net zero investment. This would also set a framework within which investors could set targets for portfolio emission reductions consistent with a net zero pathway, and also facilitate company engagements and stewardship processes that would support delivery against those targets.

We welcome the UK bringing forward the phase-out dates for coal in the power sector to 2024 and the sale of new petrol and diesel cars to 2030. Following these initial commitments, further phase-out dates for other carbon-intensive activities and a timeline for transitioning to net zero-aligned alternatives are now urgently needed. 

In particular, we are keen to see the government lay out a timetable for phase-out commitments in other areas including gas fired power generation, new fossil fuel vehicle sales and fossil fuel boilers. As part of the sixth carbon budget report, the CCC has recommended a number of sectoral transition milestones which would support movement in the right direction, including scaling up of renewable electricity and battery-electric vehicle sales, and the deployment of low-carbon heat networks. 

Against this backdrop, many investors are already taking proactive action to drive the transition towards a net zero economy. More than 450 investors worldwide have signed the Investor Agenda’s Global Investor Statement to Governments on the Climate Crisis, calling for government leaders worldwide to raise their ambition and accelerate action to tackle the climate crisis.

Within the statement, investors encourage all governments to strengthen their own climate change commitments and implement domestic policies to deliver on those targets to limit global warming to no more than 1.5°C.

Getting ahead of policy

Investors are also making notable commitments within their own activities, with 120 asset managers, including many in the UK, having made net zero commitments for their portfolios under the Net Zero Asset Managers initiative, and 28 asset owners making similar commitments under the Paris Aligned Investment Initiative.

More than 570 investors are also part of the Climate Action 100+ initiative, which focuses on actively engaging with the world’s largest corporate greenhouse gas emitters to take ambitious action on climate change.

In an environment where the delivery of an ambitious net zero strategy for the UK will require a programme of considerable investment of up to £50 trillion a year by 2030, these investors could provide an important mechanism in supporting the realisation of those ambitions.

In what will undoubtedly be a defining year, there is a significant opportunity for the UK to demonstrate that it is serious about matching its notable climate change commitments with effective policies and implementation – investors stand ready to work with policymakers to deliver a prosperous and net zero emissions economy.