We support the UK’s ambition to be the world's first Net Zero-aligned Financial Centre, embodied in the introduction of mandatory climate-related disclosures across the UK economy aligned with the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD), the development of a UK Green Taxonomy, and the Sustainability Disclosure Requirement (SDR). We should always seek to build a more resilient and sustainable global financial system. The UK must demonstrate global leadership in acting decisively to meet the Paris Agreement, utilising its seat at the G7 and G20, and working in international bodies such as the International Sustainability Standards Board to encourage global cooperation and coherence in sustainability standards around the globe.
The UK’s ambition to be seen as a global sustainable finance leader is also central to ensuring UK competitiveness in a more sustainable world. Action towards net zero emissions and limiting the damage from climate change must be at the heart of the UK’s long-term plan for economic growth. As long-term investors, we seek to channel capital on behalf of our clients to companies that are deemed likely to generate sustainable long-term value. Equivocal or vague policy signalling will make it more difficult to assess sector pathways to decarbonisation in a UK context. Clear and actionable signals now from the UK Government on the nature and speed of the transition must be provided to allow investment managers to price this into their investment processes effectively, opening new investible opportunities and allowing them to support investee companies and infrastructure projects, among other investments, to make the transition.
This is an edited extract from the IA Position on Climate Change.
In the 2021 Greening Finance roadmap, the Government stated that in order to support the UK’s net zero commitment and wider environmental goals, it was necessary to ensure that financial flows across the economy shift to align with these objectives.
The 2023 Green Finance Strategy added that the Government was working with external partners to better track private investment into the net zero economy as part of efforts to find a more effective way of tracking green investment flows in the UK.
In support of this aim the IA has argued for the enabling environment of stable regulatory policy and strong price signals which can foster long-term investment. This requires clearer signalling from Government as to its long-term plans and, with partners, the IA has advocated for the creation of a UK Net Zero Investment Plan to help deliver the UK’s ambitious net zero target.
This transition must be just, allowing emerging and developing economies to continue to grow. The transition in the UK may also be inhibited if people feel the financial cost is too great for them.
The IA will support and advocate for the creation of investment opportunities which support the net zero transition through well-defined sectoral pathways to transition and a national net zero investment plan.
The Government's Green Finance Strategy notes increasing demand from the private sector for high-integrity carbon and nature markets. The UK claims a leadership role in the development of carbon pricing mechanisms, through the establishment of the EU Emissions Trading Scheme (since replaced with the UK ETS) and has stated its ambition for the UK to be a global hub for trading in voluntary carbon markets.
The UK intends to build on guidance this year from the Voluntary Carbon Markets Initiative (VCMI) and the Integrity Council on Voluntary Carbon Markets (VCMI) to develop international best practice on market integrity, with consideration of how this can be achieved through a regulatory approach.
The Government has also published a framework for scaling up private investment in nature markets which aims to introduce new arrangements to scale-up high integrity markets for a range of ecosystem services, including carbon.
The IA will engage with the Government on its policy framework on nature markets to ensure high integrity and that a system exists to price carbon effectively.
The Climate Financial Risk Forum (CFRF) was established in 2019 to enable financial regulators and industry to share best practice and build collective capacity to assess and respond to financial risks from climate change. The CFRF is jointly chaired by the Bank of England and the FCA, and the IA is an observer member.
Session 3 of the CFRF, which ran from 2022 to 2023, produced industry guides focused on the transition to net zero, scenario analysis, and climate disclosure, data and metrics. Publications include a scenario analysis guide for investment managers.
The fourth session of the CFRF began in 2023 and will consider topics including capacity building, adaptation finance, and promotion and advocacy of the CFRF's work in the UK and internationally.
The IA will support the FCA-PRA Climate Financial Risk Forum’s work to develop best practice financial sector responses to climate-related financial risks and to ensure firms can identify, measure and manage the financial risks.
The Government has stated that the growth of jobs and skills in green finance will be a key measure of its success in establishing the UK's reputation as a Net Zero-aligned Financial Centre.
The rapid growth of sustainability and responsible investment and the pace of change requires the development of new skills at all levels in the business. A recent discussion paper from the FCA (DP23/1) observed a need for company boards to appoint more people with experience of climate-related matters, while there was a need to assess the appropriate skills, knowledge and expertise throughout the business.
Since last year, the IA's talent solution, Investment20/20, has worked with Kickstart Climate Change on events for schools from inner and east London and Glasgow to promote the role of investment management in addressing climate change and deliver workshops for schools. Investment20/20 has further plans to deliver its ‘Investing to Improve Climate Change’ to London school and college students in 2023.
The IA will support training and work experience opportunities for members and students wishing to progress their careers in sustainability and responsible investing.
