ESG under Labour

The roundtable explored how the incoming government’s policy agenda could shape the future of ESG and sustainable finance in the UK. Discussion highlighted the importance of stable, long-term policy signals to encourage investment and maintain momentum behind the transition to a low-carbon economy. Participants stressed that achieving net zero will require closer cooperation between policymakers, financial institutions and businesses, alongside clearer communication of the economic opportunities associated with the transition. The conversation also addressed the particular pressures facing SMEs, the need for greater certainty around forthcoming sustainable finance regulations, and the potential for innovative financing models to unlock investment in home energy efficiency and infrastructure. Greater consistency in ESG data, reporting standards and the interpretation of fiduciary duties was seen as essential to building investor confidence and mobilising capital at scale.

• Poor risk assessments hinder financial investment. Using EPCs is an obstacle to derisking investment and boosting the retrofit industry. Lenders assign a higher level of risk premium to these loans as EPCs are not an accurate measurement or a tracking tool. 
• Reform EPCs and improve access to data relevant to financial institutions. 
• The government should facilitate more attractive retrofit loans for consumers to release private investment. The government’s £6.6bn funding pledge will not be enough. 
• Labour should build on the Financial Markets Law Committee’s (FMLC) report, which emphasises that climate risk is an investment risk for pension scheme trustees and must be considered for beneficiaries.
• The Pensions Regulator could be instructed to provide clarifying guidance for trustees based on the FMLC’s report’s conclusions.