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The United Kingdom remains subject to a challenging 2050 net zero target and interim greenhouse gas (GHG) reduction targets notwithstanding the government’s adjustments to its delivery plans for meeting those targets.2 The UK is committed to transitioning to a low-carbon economy, and a significant shift in investment towards sustainable projects and green technology is needed to achieve the targets.
The UK government published an updated Greening Finance Strategy in March 2023.3 The Strategy sets out how the UK will pursue its ambition to become the world’s first net zero-aligned financial centre, accelerate the shift to a green global financial system and catalyse green financing globally by equipping the market with the information and tools necessary to drive the transition to a decarbonised economy. The Strategy acknowledges that there remains only 27 years to decarbonise the global economy by 2050 and that this must happen while reversing the decline in nature and adapting to the changing climate. This will require a step-change in levels of investment in the green economy, with an additional £50–60 billion of capital investment required each year to deliver on the UK’s net zero ambitions and £44–97 billion of investment over the next 10 years to deliver the UK’s nature-related goals. The 2023 update focuses on the biodiversity and nature crisis and is accompanied by a Nature Markets Framework,4 which describes the government’s principles for developing high-integrity markets to enable farmers and land managers to attract investment in natural capital, and the government’s plans to develop a comprehensive suite of nature investment standards. The gap between the finance necessary to mobilise the net zero transition and reverse the decline in nature is nevertheless still large. The UK’s Climate Change Committee (CCC) remains concerned that the level of investment is inadequate to meet the UK’s adaptation needs and considers that several measures are needed to improve adaptation investment.5 This is a key challenge that the government and financial regulators face in delivering the Strategy.
The significant developments regarding sustainability reporting that took place in 2023 (such as the publication of several new reporting standards) are designed to ensure investors and lenders can rely on robust sustainability data to direct capital flows towards investments that will support the UK’s decarbonisation and a recovery of nature (See Section V).
This article first appeared on Lexology. You can find the original version here.
