Sustainability industry calls for further clarity from UK’s Spending Review

The UK government’s Spending Review has been broadly welcomed by sustainability industry leaders; however, a climate think-tank has warned that promises made by the current government risk being ‘empty’ without proper funding mechanisms.

Delivering the UK Spending Review last week, the chancellor of the exchequer, Rachel Reeves, announced several sustainable finance-focused investments. Among these was the decision to increase the British Business Bank’s financial capacity to £25.6bn (€30.2bn).

Speaking on the government’s net-zero investment plan, Heather McKay, programme lead, finance and resilience, at the climate think-tank E3G, voiced concerns on the government’s plans to mobilise capital.

“Despite welcome announcements in the spending review, the government and the private sector must work in lockstep to unlock investment at the scale required. The chancellor must commit in her upcoming Financial Services and Growth Strategy to deliver a UK-wide net-zero investment plan.”

“Without a serious plan to mobilise capital, her promise to deliver jobs, growth and energy security will be empty,” said McKay.

The Pensions and Lifetime Savings Association (PLSA) has welcomed the UK Spending Review, while urging the UK government to continue building a strong pipeline of investable opportunities for pension funds.

Zoe Alexander, director of policy and advocacy at the PLSA, said: “It is positive that the government is taking forward crucial investment in the economy – in infrastructure, in housing, in defence, in energy and in health – and increasing the investment capability of the British Business Bank.”

She added: “Pension funds have recently committed to invest more in productive assets in the UK. In return, the PLSA has asked the government to play an increased role in creating a pipeline of investment opportunities for pension funds to support UK growth.”

Green finance

The spending review set out major funding for sustainable finance and net-zero goals, including £14.2bn for the Sizewell C nuclear plant, over £2.5bn for small modular reactors, and £2.5bn for nuclear fusion to advance clean energy.

Furthermore, it also provides £9.4bn for carbon capture, £2.6bn to help decarbonise transport by supporting electric vehicles and charging points, and £13.2bn for the Warm Homes Plan to boost energy efficiency and lower bills.

Reeves also announced a £39bn (€46.1bn) cash injection into social and affordable housing – the biggest investment in the sector by the British government in 50 years as part of her multi-year UK spending review.

The UK Sustainable Investment and Finance Association (UKSIF) described the review as a “huge net positive for net zero”.

In a LinkedIn statement, UKSIF chief executive officer James Alexander said: “It [the spending review] will also be a shot in the arm for many investors, banks and pension funds who back the government’s vision for a clean energy-powered, sustainable economy.”

He added: “We are pleased the government is expanding its pledge to deliver cleaner, more energy-efficient properties through its Warm Homes Plan. This will drive private investment in heat pumps and solar panels, which can save families hundreds of pounds each year.”

Alexander also noted that new funding for the Acorn Project, a carbon capture and storage facility based in Aberdeenshire, “shows a massive vote of confidence in this rapidly growing industry”.

“It also puts the country on a path to becoming a world leader, potentially unlocking billions of pounds in private investments and creating thousands of well-paid jobs in the sector,” he said.

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