(Bloomberg) — Britain’s failure to complete its sustainable finance framework is putting billions of pounds worth of funding at risk, according to a UK investor association representing £19 trillion ($24 trillion) of assets.
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Two-thirds of the biggest financial services firms operating in Britain are either planning to move — or have already moved — some investments out of the country and into other markets that are “more supportive of their sustainability goals,” according to a survey by the UK Sustainable Investment and Finance Association (UKSIF).
The finding stands in stark contrast to the roughly £100 billion in capital flows Britain would stand to attract if it adopted a number of key policies, UKSIF said. The organization, whose members include the asset management arms of HSBC Holdings Plc and JPMorgan Chase & Co., surveyed 400 companies across industries spanning finance, transport and real estate for its analysis.
The UK government has repeatedly backtracked on key green policies, including a decision last month to allow new gas-fired power plants. Most recently, the government has started looking into delaying support for some carbon-capture projects, Bloomberg reported last week. That followed a London court’s order to the government to revise its net zero plan after concluding it was inadequate.
“The recent flip-flopping on wider sustainability policies, continued absence of detailed policy frameworks for various sectors, alongside secondary factors such as a lack of clarity from policymakers in creating a clear and stable financial-services regulatory framework, is helping drive away much needed private capital,” James Alexander, UKSIF’s chief executive officer, said in a statement.
Britain is playing catch-up with the European Union, which has built a regulatory framework for environmental, social and governance investing that’s widely seen as a global benchmark. The UK’s taxonomy of sustainable economic activities, meanwhile, has faced repeated delays since it was first announced in 2020, and is yet to be put to a consultation.
Britain’s ESG-labeling rules for investment products are set to come into force later this year, but a decision on whether to expand the requirements to include funds domiciled outside the UK is still months away, with any legislation expected to come into force toward the end of 2025.
UKSIF urged the government to accelerate work around its sustainability policies. That includes mandating transition plans, completing the taxonomy and addressing risks to biodiversity by supporting new international reporting standards. The country’s pensions regulator also must make clear that funds aren’t violating their fiduciary duties when considering environmental and social factors, UKSIF said.
“The UK is facing a crucial inflection point that could see it either close the remaining gaps and benefit from the great strides we have taken in our global leadership on sustainable finance to date; or lose its hard-won position as a leader,” Alexander said.
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