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E3G and WWF Joint Report – The UK’s Net Zero Investment Gaps

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To get on track for net zero, the UK Government must set out a Net Zero Investment Plan within the upcoming Green Finance Strategy. Underpinning this with regular and independent tracking of financial flows across the economy and understanding net zero investment gaps will mean that the UK can deliver Net Zero and energy security efficiently and fairly for people and businesses across the country.

30 Leading Financial institutions and real economy companies, representing over £3 trillion AUM, recently called on the UK Government to deliver a Net Zero Investment Plan as part of the upcoming Green Finance Strategy. A Net Zero Investment Plan, underpinned with regular and independent tracking of net zero financial flows across the UK economy, will be crucial to supporting the UK’s economic recovery, delivering energy security and creating a world-leading Net Zero Aligned Financial Centre

This report, commissioned by E3G and WWF from Frontier Economics, conducted a high-level analysis of financial flows across four key sectors in the UK Economy, including electricity supply, surface transport, buildings, and manufacturing & construction. This analysis has been undertaken as a proof of concept, to show the value of undertaking this analysis and to establish a high-level framework for how the Government could track net zero financial flows. 

The findings establish the investment gap in each of the four key sectors listed and suggest policy mechanisms to support the rapid scaling up of private sector investment for decarbonisation. 

Key findings messages include: 

1 – The total UK Net Zero investment gap is £81 -110 bn, equivalent to 25-34% of the total investment required to keep on track for 2030. Over half of this gap is in the buildings sector, requiring an additional £60-74 bn to decarbonise. 

2 – Progress on mobilizing net zero financial flows is being made, with 66% – 74% of the investment required to get on track to 2030 should be either in place or planned. Further action is needed to ensure the investment gap is filled.  

3 – The Government should set out a clear and robust ‘Net Zero Investment Plan’ within the Green Finance Strategy. This should include:  

  • An assessment of public and private financial flows in support of the UK’s climate and nature goals, including the introduction of a Net Zero Delivery Tracker to help assess public financial flows 
  • An assessment of the investment needs for decarbonisation in across key economic sectors across the UK. 
  • An assessment of the low carbon investment gap for these sectors 
  • A plan for how the investment gap will be bridged, leveraging all the tools at the Government’s disposal.

4 – Net Zero Financial Flow tracking should be carried out independently, and on a regular basis. Any new tracking unit should be given the mandate to advise the Government on how to fill any investment gap, whether through strategic public investment or policy to direct private investment. This will enable a rapid feedback loop between policymakers and markets, and will also help monitor progress towards achieving the objectives of the UK’s Net Zero Strategy and crowd-in private investment to new and growing net zero markets.     

Read the full report here.

 

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