The suggestions are being made as a part of a brand new coverage paper – Charting the UK’s Internet Zero Future: Coverage suggestions to unlock funding – which outlines key net-zero coverage priorities that the subsequent authorities ought to concentrate on within the early days of a brand new parliament.
The soon-to-be-published coverage paper builds on proposals contained in Phoenix’s November 2023 report – Unlocking Investment in Climate Solutions.
This paper discovered that, with the correct reforms on the correct phrases for pension savers, UK pension funds may quadruple their funding in UK local weather options to as much as £1.2trn of their UK asset allocation.
This stage of funding has the potential to account for half of the gross capital funding in local weather options required by 2035 for the UK to stay on observe with its net-zero transition.
The important thing authorities coverage interventions beneficial by Phoenix Group to catalyse net-zero transition on the regional and native stage in its forthcoming coverage paper are as follows:
- Create an investor advisory physique to work with the Division of Power Safety and Internet Zero (DESNZ) to collectively construct the abilities and capability in native authorities wanted to construct an investible deal pipeline of local weather options.
- Endorse the Native Space Power Plan Steerage because the nationwide framework for place-based entire power system decarbonisation planning, to encourage areas to develop constant native transition plans.
- Simplify funding pots and encourage using financing mechanisms to crowd in non-public sector capital.
Phoenix Group’s head of local weather change and nature Bruno Gardner mentioned: “We imagine that the UK pensions business has the potential to play a key position in accelerating the UK’s progress in direction of net-zero however the adoption of formidable regional funding insurance policies by the subsequent Parliament can be essential in catalysing funding within the transition.
“Round 80% of the UK’s total greenhouse gasoline emissions lie inside the scope or affect of native authorities, and far of the funding within the net-zero transition is required in native infrastructure and providers such because the constructed setting and transport.
“Phoenix Group wants to work with local and national government to help unlock this investment in a way that supports good outcomes for our customers, whilst also playing a part in helping the UK reach net-zero by 2050.”
Overcoming limitations
The coverage paper instantly addresses a number of limitations recognized within the November 2023 report, which additionally recognises that there’s a restricted deal pipeline of investible alternatives for institutional traders to help regional funding particularly aimed on the net-zero transition.
These limitations embody:
- Lack of enough capability inside many native authorities to help the nationwide purpose of reaching our net-zero purpose: A Native Authorities Affiliation survey discovered that 79 out of 90 respondents thought an absence of workforce capability was a barrier to tackling local weather change and 70 respondents recognized abilities and experience as a barrier.
- Lack of certainty on regional funding alternatives: Many native authorities shouldn’t have detailed net-zero transition plans.
- Inconsistent entry to funding and financing mechanisms to develop the deal pipeline: The Nationwide Audit Workplace recognized 21 funds that native authorities can apply to, and there may be typically an absence of sources to handle this course of.
Phoenix Group shareholder belongings and personal markets sustainability lead Anand Rajagopal mentioned: “Institutional traders like Phoenix Group have a protracted observe document of supporting regional funding in productive and capacity-enhancing belongings similar to social housing and regeneration tasks throughout the UK.
“That is in step with the ideas laid down by the Productive Finance Working Group, i.e. productive finance doesn’t solely seek advice from net-zero-accretive belongings; the intent right here is to additionally embody broader social infrastructure that may assist plug key productiveness gaps alongside creating financial capability.
“Nonetheless, there are some limitations to the pipeline of funding alternatives to particularly help regional funding in net-zero transition, particularly when varied asset eligibility necessities for insurance coverage steadiness sheet investing are considered.
“Further, the funding routes and processes for local government authorities are numerous and in need of simplification, and there is room for greater efficiencies and scale here.”
Associated information: Local authority net-zero plans ‘strangled’ by inadequate funding
