The Financial Conduct Authority (FCA) has concluded a review of the investment landscape for climate solutions, as part of efforts to scale up transition finance in the UK.
On Thursday, the regulator published the findings from a Transition Finance Pilot commissioned by the government last summer.
The report is based on discussions with companies that develop climate solutions, and their potential capital providers — including asset owners and managers.
The FCA concluded that its own regulatory regime did not create roadblocks for financing climate solutions, and it would therefore not introduce any changes as a result of the project.
It also found the broader national landscape to be suitable for such finance, identifying 10 existing initiatives designed to help stimulate capital flows.
“The UK does not lack initiatives, but it does need more coordinated action to unlock their full impact,” said Alicia Kedzierski, the head of the FCA’s sustainable finance department.
The report made a series of recommendations for institutional investors and asset owners seeking to scale up climate solutions, including sending clearer demand signals, identifying data-related and transactional challenges, and engaging with policymakers.
“Investors consistently linked gaps in policy certainty to heightened perceived risk,” stated the FCA.
“Developers and capital providers also highlighted delivery constraints arising from dependencies on planning processes, grid and wider infrastructure availability, workforce skills, and supply chains,” it added.
“By sharing insights on where projects and sectors face policy dependencies and highlighting systemic barriers, market participants can help inform policy development.”
In particular, it advised investors to provide feedback to the UK’s Transition Finance Council, which recently had its mandate extended.
“A constructive dialogue between private finance, Government and regulators can help create a virtuous circle, enabling markets to deploy capital more effectively and at greater scale,” the FCA said.
When it comes to reporting on existing progress on investing in climate solutions, the regulator highlighted best practice from one “large asset owner” in the UK.
The case study describes how the unnamed asset owner identifies the share of its financed emissions that come from investing in climate solutions.
“The firm provides context by explaining how these investments are expected to deliver emissions reductions to the wider economy over time, including through reference to forward-looking metrics and credible pathways,” it observed.
