Green News

'Headline commitments are no longer enough': Why the Treasury is to require firms to develop net zero plans

'Headline commitments are no longer enough': Why the Treasury is to require firms to develop net zero plans

Treasury's plan to mandate that 'certain' firms and financiers establish credible transition plans have been warmly be green campaigners and sustainable investment experts

Large companies and investors that fail to set out how they plan to bring their operations into line global climate goals will soon have some explaining to do to both regulators and investors.

Yesterday evening, the Treasury confirmed plans to introduce a legal requirement that "certain firms" within the financial and corporate sector publish detailed and credible transition plans that align with the UK's net zero by 2050 commitment. Organisations that fail to comply with the rules will have to provide an explanation for why they have not done so, it said. In other words: Firms have to get with the net zero programme, or explain precisely why targets covering the whole economy don't apply to them.

In a new sustainable investment roadmap setting out a raft of fresh Sustainability Disclosure Requirements designed to help 'green' the UK economy, the Treasury said the government "expects to see the publication of transition plans become the norm".

The announcement comes amid growing pressure from green groups and some business leaders for Ministers to take a more hard-line approach to ensuring large private sector actors support the drive to reduce emissions across the economy and are fully cognizant of the stranded asset risks that will accompany the transition towards net zero emissions.

While net zero targets are becoming an increasingly common fixture at UK firms, they are far from the norm. Large numbers of businesses are yet to publicly set out how they intend to abate their emissions in line global climate goals. Meanwhile, many of those that have set headline net zero targets have thus far failed to underpin their otherwise impressive emissions pledges with detailed real-world, near-term action plans to help them deliver on their stated goals. Earlier this month, a report from WWF found just 20 per cent of FTSE 100 companies had credible transition plans in place, with more than a quarter of firms yet to commit to any form of climate target whatsoever. The analysis echoed numerous reports from financial think tank Carbon Tracker, which has published a series of studies outlining how a large proportion of companies' forward-thinking assumptions continue to be predicated on high-carbon future or a 'business-as-usual' approach that ignores net zero market trends or the prospect of climate regulation.

As such, the Treasury's new commitment to require transition plans from corporates and financiers was warmly welcomed by campaigners and sustainable investment experts across the economy, who argued it could prove to be one of the most consequential policy moves announced as part of the government's 'Net Zero Week'.

Dr Ben Caldecott, director of sustainable finance at the Oxford Sustainable Finance Programme, said the new rule, alongside the wider sustainable finance disclosure rules set out in the Treasury's new roadmap, were a "world first" that would "spur demand for climate solutions and sustainable finance".

Sam Hall, executive director of the Conservative Environment Network similarly argued the rule change would help accelerate much-needed financial flows towards clean technologies and infrastructure. "The new requirement for certain firms to publish climate transition plans (or explain why they haven't) is a huge win for efforts to align the financial sector with net zero & for mobilising more private finance to deliver the transition," he posted on Twitter.

And Steve Waygood, chief responsible investment officer at insurance firm Aviva Investors - one of a raft of companies that last week called on the government to make net zero disclosure a mandatory requirement for large firms - stressed that transition plans would be "vital" to help translate high level net zero commitments into real world emission cuts. He also predicted the mainstreaming of credible transition plans across the economy would help create a virtuous circle that would result in bolder climate action from government.

"Managing the transition will require an economy-wide partnership between companies, investors, policy makers and civil society," Waygood posted on Twitter. "Transition plans will enable companies and investors to routinely recommend to governments what further actions they need to take."

Similarly, E3G policy advisor Iskander Erzini Vernoit said the new commitment to require transition plans marked a "step change in approaches to greening finance and corporate activity" in the UK and commended it as "world-leading action from this year's UK COP Presidency".

Vernoit added that the Treasury's decision to heed growing calls for business and investors for a net zero requirement was evidence of the rapid mainstreaming of corporate climate plans in recent years. "This was an ask that even many folk in the sustainability space didn't understand or didn't think was possible, until not too long ago," he wrote. "It reflects just how far the wolrd has come in the Race to zero. Headline commitments are no longer enough - they must be backed by plans."

WWF also heralded the news as a "huge step forward" that should be celebrated. But the conservation group's executive director of advocacy and campaigns Katie White stressed there was "no time to waste" in clarifying how the proposed rules will work and putting the commitment set out in the Treasury's roadmap into law.

"We need to see a clear timeframe set for mandatory implementation by all large firms by 2023 at the very latest," she said.

The Treasury had not responded to BusinessGreen's query about which companies would be subject to the new rules, the timeline for their implementation, and the penalties for firms that do not comply at the time of going to press. However, it has confirmed it would look to incorporate standards for transition plans into regulation as best practices emerged over time, in a bid to "encourage consistency and comparability in published plans and support more widespread adoption".

While the details on the implementation of the world-leading new rule are yet to be ironed out, it is undeniable the government has thrown down the gauntlet to those firms yet to sincerely and seriously engage with the net zero transition. While the last two years has seen a flurry of net zero pledges of varying degrees of credibility, today's new rules should usher a new era where pledges and the transition plans that underpin them will be able to more easily benchmarked and scrutinised by consumers, citizens, and investors. All the while, the social license for firms that are yet to set out a vision for how they intend to operate in a low carbon future has become even more questionable. No one will be able to say they have not been warned.

Iberdrola floats £6bn boost for UK offshore wind industry

Iberdrola floats £6bn boost for UK offshore wind industry

Leading utility Iberdrola announces new investment plans at today’s Global Investment Summit

Leading renewable energy utility Iberdrola is set to invest an additional £6bn in its offshore wind farm development off the coast of Suffolk, the company confirmed at today's Global Investment Summit hosted by Boris Johnson.

Speaking at the Summit, Iberdrola's chairman and CEO Ignacio Galán announced a new £6bn investment in offshore wind projects, in addition to the £10bn already being invested by the company to double renewable generation capacity between 2020 and 2025.

The £6bn investment will go towards Iberdrola subsidiary ScottishPower's East Anglia Hub, a wind farm development off the coast of Suffolk, consisting of three wind farms: East Anglia ONE North, East Anglia TWO and East Anglia THREE.

"The Summit is the turbo boost we need for Net Zero ahead of COP26. It will support the UK government's ambitions to drive investment in green industries to deliver jobs, growth and a cleaner and greener future," said Galán.

"We are fully committed to playing our part and our £6bn planned investment in East Anglia Hub will be a significant step towards ensuring offshore wind produces enough clean electricity to power every UK home by 2030.

"The Hub is testament to how business can support the government's Net Zero ambitions within an overarching and stable framework. This is what international investors need as we get ready for the COP26 climate change summit." 

The plans represented the single largest commitment made at the Global Investment Summit, which saw almost £10bn of inward investment announced, primarily in low carbon infrastructure projects.

However, the precise scale of Iberdrola's latest investments rest on the projects securing planning consent and clean power contracts through the government's Contract for Difference auction regime. 

Construction of the East Anglia Hub is scheduled to start in 2022, subject to planning considerations for East Anglia ONE and TWO. East Anglia THREE has already secured planning consent and is expected to generate 1,400MW of power. East Anglia ONE and TWO could provide another 1,700MW of power between them. Collectively, the three farms are expected to generate over 3GW in clean electricity, enough to power more than 2.7 million homes and deliver 7.5 per cent of the UK's 40GW 2030 target for offshore wind generation, according to Iberdrola.

Iberdrola also confirmed that the Hub could support up to 7,000 jobs during development, construction, and operations.

The investment is also part of the company's wider plans to invest €150bn in renewables and smarter grids over the next decade.

The news comes as the wind energy sector this week called on governments to "get serious" about the transition to renewable energy at the Bloomberg New Energy Finance summit in London. More than 90 wind energy companies from around the world signed a manifesto setting out a series of policy proposals and calling on governments to commit to an immediate and rapid phase out of coal-based energy generation and to work with the private sector to rapidly scale up renewable energy installations and infrastructure.

Heat and Buildings Strategy: The Reaction

Heat and Buildings Strategy: The Reaction

Is the long-awaited plan 'a massive milestone in our fight against climate change' or 'a meagre, unambitious and wholly inadequate response'?

The government last night announced its long-awaited Heat and Buildings Strategy, promising to spark a revolution in how the UK's homes and offices are heated and take a sizeable chunk out of the country's carbon footprint. Full details of the new strategy are set to be released this afternoon alongside the much-anticipated Net Zero Strategy, but Ministers have already confirmed it will include a £450m grant programme to support the roll out of heat pumps, £60m of innovation funding to help drive down the cost of clean heat technologies, a 2035 target date for ending the sale of conventional boilers, the continuation of funding programmes for energy efficiency upgrades and heat networks, and a promise to make a decision on the role of hydrogen in the heating industry in the mid-2020s, following the completion of several large scale pilot projects.

The package has been broadly welcomed by energy companies and business groups, but there were also warnings from policy experts and political opponents that the level of funding provided in support of the the Strategy remains well short of the level required to deliver significant emissions reductions in the near term.

BusinessGreen rounds up some of the responses to a key plank of the UK's net zero agenda.

Prime Minister Boris Johnson said:

"As we clean up the way we heat our homes over the next decade, we are backing our brilliant innovators to make clean technology like heat pumps as cheap to buy and run as gas boilers - supporting thousands of green jobs.

"Our new grants will help homeowners make the switch sooner, without costing them extra, so that going green is the better choice when their boiler needs an upgrade."


Business and Energy Secretary Kwasi Kwarteng said:   

"Recent volatile global gas prices have highlighted the need to double down on our efforts to reduce Britain's reliance on fossil fuels and move away from gas boilers over the coming decade to protect consumers in long term.  

"As the technology improves and costs plummet over the next decade, we expect low carbon heating systems will become the obvious, affordable choice for consumers. Through our new grant scheme, we will ensure people are able to choose a more efficient alternative in the meantime."  


Labour Shadow Business Secretary, Ed Miliband, said:

"As millions of families face an energy and cost of living crisis, this is a meagre, unambitious and wholly inadequate response.

"Families up and down the country desperately needed Labour's 10 year plan investing £6 billion a year for home insulation and zero carbon heating to cut bills by £400 per year, improve our energy security, create jobs and reduce carbon emissions. 

"People can't warm their homes with yet more of Boris Johnson's hot air but that is all that is on offer."


Green MP, Caroline Lucas, said:

"Reports that the government is to announce plans to phase out gas boilers and promote a shift to heat pump systems are welcome, but nowhere near ambitious enough. Grants of just £5,000 and a 2035 boiler phase-out date simply won't be sufficient to drive down emissions or to support low income households to make the switch. The UK's heat pump policy lags well behind other European countries, with the UK installing thirty times fewer heat pumps than Estonia and sixty times less than Norway.

"Promises that 'in the future' heat pumps will be no more expensive to buy and run for consumers than fossil fuel boilers just doesn't cut it. We can't wait until 2030 to bring the costs down - we need larger grants now.

"Government's failure to introduce significant grants and zero interest loans for home insulation at the same time as introducing measures to promote low carbon heat is a massive omission, and is yet another example of a government target with no properly thought-through or funded plan to meet it. When nearly 19 million homes fall below the energy performance certificate (EPC) rating C, and with around 10,000 excess deaths each winter caused by damp cold homes, the need to replace the failed Green Homes Grant with something bigger, bolder and better is overwhelming.

"We need a significant investment to deliver a comprehensive, local authority-led home insulation programme and to support families' transition to clean heating, which would in turn deliver thousands of good green jobs across the country. A new Zero Carbon Homes standard must also come into force by 2025 at the latest, and we need to see measures to cut VAT to zero per cent for refurbishment projects which substantially reduce the emissions of buildings."  


Greg Jackson, CEO and founder of Octopus Energy, said: 

"This Heat and Buildings Strategy will help kickstart a cheap clean heating revolution, by bringing prices down for households and allowing companies to invest in scaling up their clean heating operations. When the new scheme launches in April, Octopus Energy will install heat pumps for about the same cost as gas boilers. Octopus has already committed £10m investment to its research and development and training centre dedicated to the decarbonisation of heat, and has begun training engineers at the rate of 1,000 per year. 
"But this is just the beginning. By scaling up the technology and supply chain in Britain, innovative companies like ours will soon be able to fit and run heat pumps without any government support, bringing us one step closer to making the UK the Silicon Valley of Energy and creating thousands of clean energy jobs throughout the country. Electric heat pumps are more efficient, safer and cleaner than gas boilers and can help make homes more comfortable with less energy. Today we've crossed a massive milestone in our fight against climate change and to reduce Britain's reliance on expensive, dirty gas." 


Chief Executive of E.ON UK, Michael Lewis, said:    

"With the right policy framework in place, we're confident the cost of a heat pump can be reduced by up to half over the coming years. We welcome proposals in the Heat and Buildings Strategy which are designed to tackle this issue head-on, making the green option the default option.  Once we have mass demand, commercial innovation in installation and economies of scale will take over to reduce costs and give customers greater confidence in what is already a tried and trusted technology for many around the world."


Chief Executive of ScottishPower, Keith Anderson, said:   

"Decarbonising heat is our toughest challenge on the road to Net Zero. With some 23 million UK homes to be converted to low carbon heating by 2050 we need to urgently support the delivery of proven zero carbon technologies, like heat pumps. Deploying heat pumps at scale will drive costs down dramatically over time, and will create wider economic benefits by promoting the UK supply chain and new skilled jobs.   

"This is where the scale and ambition of the Government's Boiler Upgrade Scheme will be invaluable. Ready access to support grants will kick-start the demand for electric heating, allowing the industry to accelerate the delivery of electrification and quickly bring down upfront costs through innovation and growing the supply chain. Other policies will also be needed to address distortions in energy bill costs and create a level playing field between a heat pump and a gas boiler. By the end of the decade, with the right policies in place, the combined initial and ongoing costs of a heat pump can be as cheap as a gas boiler." 


Phil Hurley, Chair of the Heat Pump Association, said:  

"The heat pump industry warmly welcomes these bold steps forward.  The industry in the best shape it has ever been, with sales this year already double those seen ever before. This announcement is timed perfectly to take advantage of the Heat Pump Association's recently-launched training course, with the industry now ready to retrain the UK's army of installers with the capacity to train up to 40,000 per year, to ensure consumers can find a suitably trained and skilled heat pump installer when they need one. 

"Today's announcement will give industry and installers a huge confidence boost that now is the time to scale-up and retrain in preparation for the mass roll out of heat pumps, as well as making heat pumps as affordable as boilers, so all consumers can soon access and enjoy the benefits of affordable, reliable low carbon heating that stands the test of time."


Shaun Edwards, chief executive officer at Groupe Atlantic UK, ROI & North America, said: 

"Ideal Heating welcomes the publication of the Heat and Buildings strategy and the continued support from the UK government to low carbon heating systems, particularly heat pumps. As a manufacturer of multiple heating technologies including heat pumps, we feel we are in an excellent position to support our customers as the market transitions to lower carbon heating solutions.  

"This commitment from the UK government allows Ideal Heating to continue investment in UK heat pump R&D facilities and skills, as well as additional manufacturing capacity, ensuring we meet the specific demands of UK homes and installers whilst strengthening the local supply chain."


Juliet Phillips, E3G Senior Policy Advisor, said:

"The Heat & Buildings Strategy is the vehicle for accelerating progress towards greener homes - reducing energy bills, creating warmer and healthier houses, and boosting green jobs across the country. We welcome the focus on making heat pumps an attractive and affordable solution for households looking to replace polluting fossil gas boilers. The 2035 target for phasing out fossil gas boilers can act as clear signal to industry and households of the pathway ahead, but government must beware the Trojan horse of so-called "hydrogen ready" boilers - which could have a similar carbon footprint to fossil gas boilers, in the absence of secure connections to green hydrogen supply.

"It is now up to the Treasury to back this plan with a comprehensive investment package - with the new spending commitments announced today falling considerably short of what's needed to get on track for climate targets. There is a major energy efficiency funding gap, which could significantly undermine the UK's ability to cut emissions from housing. New analysis by E3G has shown that around 80 per cent of middle and low income households living in inefficient housing have no access to nationwide support to improve their homes. The Spending Review is the opportunity for the Treasury to address this and ensure everyone can reap the benefits of warmer, healthier homes that are cheaper to run."


Ana Musat, Head of Policy at the Aldersgate Group, said:

"Decarbonising the UK's built environment is a significant challenge, but one that comes with major opportunities - including job creation potential, reducing the UK's reliance on fossil fuels, and delivering lower bills for customers. The strategy is set to include important measures for realising that vision, such as a commitment to accelerate the installation of heat pumps, innovation funding to bring down the cost of installation, and grants to help households meet the upfront cost. All of these measures are fundamental to deliver a fair transition to clean heat, mobilising critical private sector investment and growing supply chains.

"To build on these strong foundations, Government should set clear regulatory and fiscal measures to drive the uptake of energy efficiency retrofits, which will be key to lowering energy bills and tackling fuel poverty, as well as reducing demand on the grid. Energy efficiency retrofits can also create significant economic activity and job creation, being labour-intensive and rooted in local supply chains: 108,000 net new jobs could be created annually until 2030 through energy efficiency. There is also potential to scale up these projects by investing in skills, for instance through the rapid implementation of the Green Jobs Taskforce's recommendations. Measures like the rollout of minimum energy efficiency standards for domestic buildings and commercial properties and a reduction of VAT for energy efficiency retrofits will be essential in creating demand and and attracting investment into insulation and deep retrofits."


Friends of the Earth, Mike Childs, Head of Science, said:

"Of course this is presented to look fantastic, and with industry backing, but a quick glance reveals it to be quite modest. £450m delivered via individual £5,000 grants means 90,000 heat pump installations over three years. That just isn't very much, and won't meet the Prime Minister's ambition of 600,000 a year by 2028. Investment will drive down the cost of heat pumps, and technical innovation plus skills training is a part of this, but so is scale. These grants will only incentivise the best-off households.

"£950m pounds over three years for the home upgrade scheme just won't drive the scale of energy efficiency needed in both private and rented sectors. This is a start, it's just not a very good one when the many benefits of a really generous scheme are abundantly clear: from warm, healthy homes to slashed emissions, with jobs to boot."

Government teams up with Bill Gates and top corporates to catalyse wave of green tech investment

Government teams up with Bill Gates and top corporates to catalyse wave of green tech investment

Prime Minister announces £9.7bn of inward infrastructure investment, as government launches new £400m public-private clean tech innovation fund

Prime Minister Boris Johnson this morning used the Global Investment Summit as a curtain-raiser for the government's much-anticipated Net Zero Strategy, announcing almost £10bn of new foreign investment in a wave of primarily low carbon infrastructure projects.

The government confirmed a new package of 18 deals worth £9.7bn, which are set to ramp up investment in a host of clean infrastructure projects, including offshore wind, hydrogen development, carbon capture and storage (CCS), and green homes.

Meanwhile, Johnson shared a virtual stage with billionaire philanthropist Bill Gates to announce the UK government has teamed up with Gates' Breakthrough Energy Catalyst clean tech venture to each invest £200m in a new fund for supporting cutting edge clean tech projects.

"The world's top investors have seen the massive potential in the UK for growth and innovation in the industries of the future," Johnson said. "The fantastic £9.7bn of new investment we have secured today will power our economic recovery, creating thousands of jobs and helping to level up across the country.

"This is just the start. We will see new partnerships for green growth forged at today's Global Investment Summit, as we look ahead to COP26 and beyond."

The new inward investment - which is expected to support at least 30,000 new jobs - was announced alongside the launch of a new Investment Atlas from the Department for International Trade, which aims to help international investors identify and execute high priority investment opportunities in England, Scotland, Wales and Northern Ireland.

The Atlas highlights over 50 strategic investment opportunities and features considerable overlap with the Prime Minister's 10 Point Plan for a Green Industrial Revolution and the government's Net Zero Strategy, which is expected to be published this week.

New projects being showcased to investors include offshore wind substructures in Scotland and manufacturing ports in Teesside and Humber, sustainable food systems delivery in Telford, and net zero transport projects in Coventry.

"The UK is the best investment destination in the world and our Investment Atlas will help to drive more investment into green industries across the UK, and make it easier for businesses to make decisions on where and what to invest in," said International Trade Secretary Anne-Marie Trevelyan. "These investment deals announced today will create jobs, boost the economy, spread prosperity and level up the country as we build back better and greener."

The new package of investment includes a headline £6bn commitment from European energy giant Iberdrola to expand its East Anglia Hub, although the company stressed the plans were subject to securing planning consent and a Contract for Difference for its proposed offshore wind farm projects.

Similarly, global logistics firm Prologis announced plans to invest £1.5bn over the next three years to develop net zero carbon warehouses across London, the South-East, and Midlands, supporting around 14,000 new jobs, while waste management giant said it is to invest £1bn in decarbonisation technologies at five UK sites and Eren Paper unveiled plans to invest £500m to acquire a mill in Shotton, North Wales and convert it to produce cardboard manufactured from paper waste.

And in a further boost to the government's Net Zero Strategy, AB InBev's Budweiser Brewing Group announced it has teamed up with green hydrogen specialist Protium on a £100m project to deploy zero emission green hydrogen at the Magor brewery in South Wales.

Similarly, Getir announced plans to invest £100m to rapidly expand its superfast grocery delivery service across the UK, which utilises a 100 per cent electric fleet of delivery vehicles, while Malaysian conglomerate Petra Group said it is to invest £30m in establishing the Petra Modular business in the UK to deliver sustainable modular homes and a further £30m in establishing a 'Green Rubber' business in the UK.

Separately, Johnson touted the launch of a new Catalyst programme, which will see the UK government work with Gates' Breakthrough Energy Catalyst to bring together businesses, governments, philanthropists, and individuals to invest in early stage climate technologies. The program is expected to focus on four key green technology areas: green hydrogen, long term energy storage, sustainable aviation fuels, and direct air capture.

The government said it has already committed at least £200m for the development, demonstration and deployment of UK projects in these areas as part of its £1bn Net Zero Innovation Portfolio, and has now secured £200m of match funding from investors and businesses partnered with the Breakthrough Energy Catalyst.

"We will only achieve our ambitious climate goals if we rapidly scale up new technologies in areas like green hydrogen and sustainable aviation fuels - technologies that seemed impossible just a few years ago," Johnson said. "Ahead of COP26, this new partnership with Catalyst is a boost to the UK's vision for a green industrial revolution. It will help to bring innovative technologies to market globally, while building new skills and creating high-quality jobs across the UK."

The partnership was welcomed by Gates, who predicted the alliance with the UK government would "accelerate the deployment of these critical climate solutions, helping to make them more affordable and accessible".

"In order to achieve net-zero emissions, we need to reduce the costs of clean technologies so they can compete with and replace the high-emitting products we use today - I call this difference in price the Green Premium," he said. "Working with public and private sector leaders, including the UK, Catalyst will be a key vehicle for reducing Green Premiums, building the clean industries of tomorrow, and creating lasting jobs in communities around the world."

The latest announcements form part of the government's 'Net Zero Week', which will see it release a raft of long-awaited policy documents ahead of next month's COP26 Climate Summit detailing how it intends to accelerate the net zero transition.

Last night the Treasury announced plans for a significant strengthening of corporate sustainability reporting rules and the government unveiled details of its Heat and Buildings Strategy, confirming plans for a new grant scheme for heat pump installations and a host of reforms designed to accelerate the development and deployment of clean heat technologies.

The full Heat and Building Strategy is expected to be published later today and the government's overarching Net Zero Strategy is also imminent, which is set to include a raft on plans on how to accelerate decarbonisation efforts, including new support for nuclear power plants, CCS, and electric vehicles, among other areas.

Finally, the Treasury is poised to publish a controversial review of the potential costs of the net zero transition, which critics have already warned - based on briefings about the report - is likely to be overly pessimistic about the net costs of climate action.

Green business groups and campaigners have broadly welcomed the measures announced to date, arguing they should catalyse a significant uptick in investment in clean technologies. However, they have also warned that the current plans will not yet put the UK on track to meet its net zero goals and further longer term funding and policy commitments are required to trigger more rapid emissions reductions.

Vodafone unveils new Eco-SIM card

Vodafone unveils new Eco-SIM card

New SIM card produced using recycled plastic to be made available across Europe from this month

Vodafone is introducing Eco-SIM cards made from recycled plastic across its European markets, as part of the company's commitment to reduce its environmental impact. From October, the company will begin rolling out Eco-SIMs to replace plastic SIM cards across all 12 of its European markets, as well as in Egypt, Turkey, and South Africa. The new cards will be available in the UK from 1 April 2022.

The new SIM cards are be made in the same half-sized format as the card holders Vodafone introduced in 2020, which have already served to slash the company's plastic use by around 340 tonnes a year. The Eco-SIM is expected to further cut Vodafone's plastic footprint by 320 tonnes each year, saving 1,280 tonnes of CO2 equivalent by removing the need to manufacture new plastic.

"Our ultimate aim is to remove plastic SIM cards entirely, but switching to Eco-SIMs, made from 100 per cent recycled plastic, is a big step in the right direction," said Ahmed Essam, CEO of Vodafone UK. "This is one of many changes we're making to help us and our customers reduce our impact on the planet. In addition to the introduction of Eco-SIM, our business is now powered by 100 per cent renewable electricity, we're extending our device reuse and recycling schemes and we've eliminated single-use plastic packaging from our deliveries. We'll be introducing Eco-SIMs for all of our customers in the UK from 1 April 2022." 

The company is also aiming to end the need for physical SIM cards entirely, with the introduction of eSIM cards, which are already available in European markets, according to the company. As such the Eco-SIM is being rolled out while customers are still in need of a physical card until eSIMS become more widespread, the company said.

The move follows Vodafone's elimination of all unnecessary plastic and disposable single-use items from its stores and offices in 2020. The company latest innovation is also part of Vodafone's wider push to achieve net zero emissions across its UK operations by 2027 and for its full global carbon footprint by 2040.

Road to COP26: Investors hope for step change in climate action

Road to COP26: Investors hope for step change in climate action

Leading financiers believe industry has the 'power and willingness' to drive change, but governments have to help drive accelerated transition towards net zero emissions

As investors continue to connect their desire for a better planet with their investment decisions, fund managers say there is a lot financiers can do to tackle escalating climate change, but governments gathering at next month's COP26 Climate Summit need to act too if they are to catalyse the rapid emissions reductions required to deliver on the goals of the Paris Agreement.

The financial industry has responded to the looming planetary crisis by creating a $35tr environmental, social, and governance (ESG) investment market. And money keeps pouring in.

The Climate Policy Initiative (CPI) estimates that total climate-related flows reached between $608bn and $622bn in 2019. According to Morningstar, in the first quarter of 2021, global sustainable funds attracted $185.3bn and ESG assets are on track to exceed $53trn globally by 2025, representing more than a third of the expected $140.5trn of global assets under management.

Investors are reappraising their portfolios and weighing up the risks associated with climate transition. But the question remains: can they use their investments as leverage to put companies on a cleaner path?

"Investors potentially have a huge impact on climate change," Whitney Voûte, head of investor relations at US Solar Fund, said.

Voûte believes the industry has the power to drive change, but, historically, the bigger question has been one of interest and will. Not anymore. "The amount of capital flowing into the space makes it clear that the power and willingness are now both there," she said.

Banking on climate change

The role that financial services can play must not be misunderstood or overstated. The sector is responding to changes but there is a limit as to how much it can do.

"Investors [are] mostly investing in areas that support climate change solutions because the returns are good," said Ben Guest, head of the new energy division and fund manager at Gresham House. These areas are becoming increasingly investable because of government policies that ensure attractive returns.

For some investors, climate change is not just a money problem but also a moral one; they want their investment decisions to aid the transition to a greener economy. 

"There are many final investors that are creating positive change by, for example, avoiding investment in fossil fuels or targeting investment renewables directly. This is very positive indeed," Guest added.

Yet investors and advisers who have created portfolios that take the climate into consideration paint a picture that is not black and white, but more nuanced. 

These portfolios do not mean that every investment must be focused on clean energy or energy efficiency. Most include companies that are trying to improve their governance.

Financing the future

Asset managers' greatest impact on climate change comes via the greenhouse gases emitted by their investment holdings. Still, the redirection of capital can have a limited scope for real-world decarbonisation. 

"We believe that, for some industries, especially those such as utilities - which are currently high emitters but with credible pathways to net zero - structured and long-term engagement is far more effective," Carlota Garcia-Manas, head of engagement at Royal London Asset Management, said.

She argued that excluding this sector would be the easiest way to reduce emissions, but that such a move would not actually lead to any decarbonisation in the
real world. 

"We believe that avoiding utilities companies would have little impact, because it would remove our ability to influence their behaviour and ignore their key role in the world's energy transition," she added.

Over 30 per cent of RLAM's weighted average carbon intensity for its equities and fixed income investments stems from exposure to the utilities sector.

However, Alex Rowe, lead portfolio manager of the Nomura Global Sustainable Equity fund, warns that investors' attempts to push companies to do better has been met with varying degrees of success.

Citing the limited success investors have had in changing the course of some mega tech companies, Rowe highlights an unpleasant truth.

"The industry should be honest that what it has tried to do has not really had much influence and think differently as to how its efforts could be maximised," he said.

"The number of hours that can go into these engagements across a vast number of investment houses could be put to much better use," he added.

The cost of doing nothing

After a summer of extreme heat, wildfires and floods in Europe, the costs of climate change - human and financial - have become increasingly stark.

"It is impossible to quantify but a world in turmoil is clearly going to be hit hard. The probability of this happening is rising as temperatures, ice cover and sea levels are all heading in the wrong direction," Guest said.

Still, investors alone do not have the power to engender the necessary change.

"The global finance industry plays an important role. However, it needs a coordinated approach to deliver results," Pascal Dudle, head of listed impact and portfolio manager at Vontobel Asset Management, said.

Guest agrees. "It requires public pressure and opinion, political will, regulations, laws and subsidies combining to drive change," he said.

As the investment community comes under increasing scrutiny with regards to the actual impact it is having, Dudle warns that investors need to allocate resources to solve the problem.

"It is not a matter of beating a benchmark and obtaining attractive returns, it is a matter of survival."

This article first appeared at Investment Week.

Latest Job Listings