UK ‘Green Day’ policy announcements – implications for non-executive directors

• Focus on renewables to deliver clean energy – The aim for the UK is a decarbonised electricity grid and the cheapest wholesale energy prices in Europe by 2035. Renewables will play a key role, particularly solar (with a newly launched industry-government solar taskforce and the goal to quintuple solar power by 2035) and offshore wind (with the announcement of a Floating Offshore Wind Manufacturing Investment Scheme which will provide up to £160 million in funding for offshore wind projects). The UK will also increase domestic oil and gas production, scale up nuclear and invest in expanding hydrogen capacity.
• Endorsement of CCUS – To meet its net zero target, the UK is aiming for enough carbon capture storage and utilisation (CCUS) capacity to store up to 50 million tonnes per year by mid-2030. The projects that may make up the UK's initial CCUS clusters were announced, and the Government restated its commitment to £20 billion in funding for CCUS deployment.
• Green supply chains – The strategy aims to engage UK business ‘to play a key role in green supply chains, from nuclear to CCUS to new vehicles’. Consultations on manufacturing-focused initiatives (the Zero Emission Vehicle Mandate and the Clean Heat Market Mechanism, for example) will provide future direction.
• Energy market reform – speeding up the building of new networks and the connection of new generation and demand projects to the grid was cited as a high priority. The Government also committed to a rebalancing of gas and electricity costs by end of 2023-24. Planning reforms should also make it easier to deploy renewable energy infrastructure.
• Direct support for business – to promote industrial decarbonisation the Government announced extensions to the Industrial Energy Transformation Fund and Climate Change Agreement schemes as well as piloting an energy advice service for SMEs.
• EU-ETS – the Government committed to legislate for the Eu Emissions Trading Scheme (EU ETS) at least until 2050, and is considering expanding it to more high-emitting sectors.
• Sector-specific support – the Government outlined a range of sector-specific initiatives, such as the extension of the boiler upgrade scheme to 2028, a drive to insulate the least energy efficient homes, and measures to support the rollout of electric vehicle infrastructure, amongst others.

• The Government restated its commitment to becoming a ‘Net Zero-aligned Financial Centre’ – meaning ‘financial institutions having a robust firm-level transition plan setting out how they will decarbonise as the UK meets its ambitious and legally binding net zero targets’.
• Expansion of reporting and disclosure requirements is a key part of this plan:
  • the Government will continue to consult on the expansion of reporting and disclosure requirements, including net zero transition planning, nature-related financial disclosures and the development of a green taxonomy, amongst others. See Table 1 below for a timeline of key activities. A full explanation of the current disclosure landscape can be found here.
  • Once the first two IFRS Sustainability Disclosure Standards are published under the ISSB (expected June 2023), the UK Government has stated its intention to review these as quickly as possible, with the aim to be an early adopter.
• Leveraging private finance - the Government outlined a range of measures which it hopes will leverage £100 billion in low carbon finance from the private sector, including:
  • the development of a series of investment roadmaps for key technologies
  • targeted public finance, including £22 billion to be deployed via the UK Infrastructure Bank across its private and local authority lending arms
  • A range of accelerator schemes relevant to businesses operating in those sectors. For example, the £30 million Heat Pump Investment Accelerator competition, designed to leverage £270 million of private investment to accelerate the manufacturing and supply of heat pumps in the UK. For information on other specific schemes see p.85 of the strategy.
• A new Net Zero Business and Investment Group – which will ensure that the investment roadmaps are informed by business needs and ideas.
• Place-based investment opportunities – the strategy outlines a number of initiatives to mobilise private sector investment locally, for example, further funding in excess of £350 million to local authorities via the Local Electric Vehicle Infrastructure Fund over the next 2 years.
• Support for export markets - the UK Export Finance’s maximum exposure limit will increase from £50bn to £60bn, to encourage UK green exports. Between 2020 and 2021, it is estimated exports from ‘low-carbon’ sectors increased by 67%, compared to total exports which increased by 6%.

• The UK Government expects to invest £4.2 billion in net zero research and innovation from 2022-2025. This investment will help fund the development of a range of GHG reduction and removal technologies and, in some cases, also reduce nature loss.
• The Government will also fund research into financial and organisational innovations such as business models that de-risk low-carbon investment, financial mechanisms for achieving net zero, and even creating ‘nature markets’.

• The framework has been developed to scale-up nature markets - which enable businesses to invest in natural habitats to sequester carbon, provide nature recovery, clean water and other benefits. The Government has set a goal to grow annual private investment flows to nature to at least £500 million every year by 2027 in England, rising to more than £1 billion by 2030.
• Plans to develop a robust marketplace are outlined in the framework – including the development of rules, high integrity nature investment standards, and institutional arrangements, regulatory roles and market infrastructure.
• The framework provides important context on the role of straightforward financial instruments to support nature recovery as we await the framework from the Taskforce on Nature-related Financial Disclosure (TNFD) later this year, for which the Government has also announced an intention to adopt.

With a doubling of international climate finance promised (to £11.6 billion by 2025-26) there is a further opportunity for business to support the global economic transition – investment will be focused on clean energy, reversing biodiversity losses, adaptation and resilience, sustainable cities, infrastructure and transport.

• Climate change and nature loss are interlinked and mutually reinforcing and the framework outlines a vision to halve global emissions, halt and reverse nature loss and build resilience to climate impacts.
• Six levers are highlighted to tackle these global challenges, all of which offer opportunities for UK business – these are international partnerships, finance, trade and investment, expertise and domestic leadership, and science innovation and technology. For example, the report states that ‘nature smart’ policy solutions can provide GDP benefits up to $150 billion, and in the export market, low carbon financial services alone could be worth up to £280 billion a year globally by 2030.