- A new survey found 82% of UK-based institutional investors are worried about the impact of climate-related risk on their portfolios, with 40% having sold or reduced holdings due to exposure to climate-related risks.
- 76% of investors say they would invest more in the UK if climate-related risk was lower there. There is a clear economic advantage for action to manage climate risk.
- Investors want to see policy action to mobilise investment, with 88% more likely to invest in a sector if it were covered by a government sectoral investment plan.
After a decade of record-breaking temperatures and climate damages culminating in the hottest year on record, a new survey of 100 UK-based institutional investors, commissioned by E3G, reveals that 82% are worried about the impact of climate-related risks on their portfolios. These fears are driving hesitancy in allocating capital to UK markets.
This presents an opportunity for UK policymakers: 76% of investors say they would invest more in the UK if climate-related risk was lower there. Policy action would remove investment barriers and increase the UK’s competitiveness for international investment.
Geopolitical turbulence creates a narrow window of opportunity as investors assess where best to allocate their capital. E3G analysis suggests that active steps taken by government now could provide a strong signal to investors and could help boost UK investment.
Investors backed policy steps to manage climate-related risk. This included stating they would be more likely to invest in a sector covered by a government sectoral pathway (88%); and reiterated that climate transition plans are desirable tools to inform decision making (86%).
The UK government’s consultation on mandatory transition planning due early this year provides a much-needed opportunity to deliver these reforms at pace and send investors and markets a clear signal that stability and competitiveness remains a priority for this government.
Results
The survey, commissioned by E3G and conducted by Censuswide, polled 100 UK-based institutional investors from 16 to 24 December 2024. The findings show a clear link between climate-related risks and investment decisions, while highlighting actionable solutions:
Climate-related risk is affecting investors’ decision making, contributing to the UK’s investment crisis and stymying growth.
- 82% of UK-based investors are worried about the impact of climate-related risk on their portfolios.
- 40% have already sold or reduced holdings in an asset due to its exposure to climate-related risks, while 46% have avoided investing in an asset due to its exposure to climate-related risks.
Policy reform could remove investment blocks.
- 76% of investors would be encouraged to invest more in the UK if climate-related risk was reduced.
- Investors strongly backed policies like a Net Zero Investment Plan that would help better manage UK climate-related risk, with 88% more likely to invest in a sector if it was covered by a government sectoral investment plan.
Investors back transition planning as a way to reduce risk and increase transparency around climate-related risks in investment.
- 86% of investors are more likely to invest in a company if it is taking active steps to manage its climate-related risk.
- 86% of investors think disclosure of a climate transition plan is a valuable tool for their investment decision making.
Quotes
Joe Dillon, Researcher at E3G said: “Climate related risk is increasingly a priority in investor decision making. There is a narrow window of opportunity for the government to take necessary steps to manage climate-related risk in the UK and so boost the UK’s global competitiveness for investment. Delivering on long overdue financial disclosure regulations is a vital first step to provide a signal of reassurance to investors that the UK is serious about addressing this issue.”
Heather McKay, Senior Policy Advisor at E3G said:
“Global private sector demand for the net zero transition creates a trillion-dollar growth opportunity for the UK. However, as investors have made clear, unlocking this green investment potential requires government to match this ambition. Backed by investors representing over £3 trillion AUM, a commitment from the Chancellor to deliver a Net Zero Investment Plan promises to kickstart a wave of investment in Britain’s green growth future.”
Notes to editors
About transition plans
Transition plans provide stakeholders with information on how a company will meet climate goals, manage risks and opportunities, and contribute to economy-wide transition. Credible, transparent, and well-defined private-sector transition plans provide investors with the confidence to invest in companies, both accelerating their paths to net zero and growing the economy.
About a Net Zero Investment Plan
A Net Zero Investment Plan would set out a long-term strategy to crowd in the investment needed to get to net zero. The plan would set out clear sectoral pathways, and giving detail on the policies and investments the government plans to implement to drive sectoral transitions and reduce risk. This would provide the policy certainty and stability that the private sector has been calling for, would greatly reduce transition risk and would encourage the best use of scarce public resources to crowd in private finance. Investors representing over £3 trillion AUM have called on Chancellor Rachel Reeves to deliver such a plan.
About E3G
E3G is an independent, not-for-profit climate change think tank. E3G has been a leading expert voice for over 15 years on areas including green and sustainable finance, energy efficiency and zero carbon heat, energy system decarbonisation, and the political economy and governance of climate policy. This evidence reflects these areas of specialisation.
E3G provides secretariat support for the Transition Plan Taskforce, the Green Finance Institute’s coalition for the Energy Efficiency of Buildings, the Energy Efficiency Infrastructure Group, the Electrify Heat Coalition, and the Taskforce on Climate-related Financial Disclosures.
