The UK’s leadership in sustainable finance is under threat according to the UK Sustainable Investment and Finance Association (UKSIF), which today released a report on how to prevent it falling further behind, stressing that the sector is at a key inflection point.
The Financing the Future report – which focuses on financial services, identifying the regulatory gaps and what is at stake should the UK fail to fill them – found that more favourable policies could see up to £100bn (€116.5bn) of assets under management (AUM) shifting towards sustainable finance in the UK.
The UK’s green finance lead is at risk of slipping behind, and with it its share of the £23.8trn which is currently invested globally in sustainable investing assets, the report stated. This is due in large part to a lack of sufficient support at a policy level amongst other factors, UKSIF said.
“The recent flipflopping 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 into the UK that can help progress the country towards net zero,” said UKSIF chief executive officer James Alexander.
In response to this, UKSIF has made key recommendations which include:
- delivering a clear and world-leading sustainability disclosure regime, including International Sustainability Standards Board (ISSB) reporting, mandatory transition plans and green taxonomy;
- clarifying the fiduciary duty of pension schemes, including codifying the recent Financial Markets Law Committee (FMLC) report into trustee guidance and considering the role of investment consultants;
- embedding biodiversity into the regulatory framework through the Taskforce on Nature-related Financial Disclosures (TNFD).
Industry consensus
More broadly, research from the Green Finance Institute suggests that biodiversity loss and damage to the natural environment threatens a greater hit to GDP than the 2008 financial crash or the coronavirus pandemic, thus highlighting the critical nature of the juncture.
The report also highlights UK firms’ overarching support for stronger green policies.
UKSIF found that 69% of business decision-makers in the finance sector agree that the lack of certainty over sustainability policy and regulation is limiting their investment in the UK.
Additionally, 95% of large UK finance firms would increase their investment in sustainable/green projects in the UK if favourable green policies were implemented.
While nearly eight in 10 (77%) said that greater harmonisation of financial sustainability standards globally would have a positive impact on companies investing.
