Is the UK following through on what it says about climate action?

This is Sustainable Views. Welcome back to Sustainable Views, the podcast looking at sustainability policy and regulation in depth. You join us this week as London Climate Action Week kicks off, one of the staging posts on the long road to COP30 in Brazil this autumn. At COP26 in Glasgow 4 years ago, then Prime Minister Boris Johnson and Chancellor Rishi Sunak shouted loudly about UK climate leadership.

The children who will judge us are, are children not yet born. And we mustn't fluff our lines or miss our cue, because if we fail, they will not forgive us. Today I'm announcing that the UK will go further and become the first ever net-zero-aligned financial centre.

The current Labour government's recent spending review agreed some serious investment for the energy transition.

And because I am determined to make sure that the energy technologies of the future are built here and owned here, and that those jobs come to Britain. With spending review decisions means that we can invest in the wholly publicly owned Great British Energy.

But elsewhere there are concerns about how green its policies really are. Joining me to discuss just where the UK is on climate action are Florence Jones, who covers UK policy for Sustainable Views. Hi, Florence.

Hi.

And Elizabeth, who keeps a close eye on all things related to sustainable finance for us. Hi, Elizabeth.

Hello.

So great to have you both with us today. So Florence, you covered the recent Spending Review for Sustainable Views. How strong do you think it was in showing a real commitment to the energy transition?

Yeah, so Rachel Reeves, Chancellor, delivered her Spending Review on June 11th, and this is where she allocates the different budgets for government departments. And this one went up into the year, the parliamentary year 28/29. And it was clear from this spending review that the government is committed to its clean power by 2030 target. At the end of April, at the Energy Security Summit in London, Prime Minister Keir Starmer said that it was in the DNA of this government, that 2030 target. And I think Reeves's review really kind of cemented that. There's no doubt there. So nuclear was one of the big kind of winners in this in terms of clean energy. There was £14.2 billion for the large-scale Sizewell C nuclear reactor. 2.5 billion for small modular reactors, with Rolls-Royce announced as the winner of the SMR competition, and also 2.5 for nuclear fusion research and development. So while Sizewell C won't be operating until probably after government has attempted to reach its 2030 target, many have kind of welcomed this longer view look and like longer term thinking from government. Dara Vyas, who is the CEO of the trade body Energy UK, told me on the day of the review that she thinks this is really positive for investors, particularly giving that kind of longer-term certainty is not usually how governments work, and that was really welcomed by her. The spending review also confirmed £13.2 billion for the government's Warm Homes Plan, which will fund energy efficiency improvements, solar panels, and heat pumps for homes, and that was widely welcomed. James Dyson, senior researcher at E3G, said it was proof that this government is serious about tackling fuel poverty, boosting energy security, and cutting our reliance on Russian gas. So yeah, that was really positively received, especially after the Conservative government cut levies for insulation in 2013. Now, just to kind of rein in that enthusiasm a little bit, anybody listening to the podcast who also listened to the Spending Review might be wondering at what point Rachel Reeves spoke about climate, and she actually didn't mention nature or climate by name at any point during the review. It was very much centered on the political issues of the day in the eyes of the government. So that's geopolitical uncertainty, defense, and of course house building. So some people did express concern on the day of the review that this failed to recognize the true risks posed by climate, and that was like a big omission in the eyes of some. So Laurie Laybourne from Chatham House, who's the director of Strategic Climate Risks Initiative and associate fellow, said that it suggested that the government hadn't really got its head around what is one of the biggest threats to our security in the 21st century, namely climate change. So definitely not a green spending review. However, lots of positives for clean energy and also warm homes.

Great. Well, it's good to have a little bit of positivity at the moment, given the rather large amounts of negativity in the world. Another promise made by UK politicians, as we mentioned in the introduction to this podcast, was that London was to become the green finance capital of the world. Lizzie, how are we looking on this?

Yeah, absolutely. So, um, the— we have the Global Green Finance Index, which is published every year, and London is consistently ranked number one in that, I think possibly, um, of all time. And it remains at the top this year, but it's worth noting that every city on the index, um, has lost points in its kind of overall ranking, um, this year. So the, the organization that runs that says, uh, this is down to changes in outlook for the economy generally and the change in government direction in the US. And it's worth noting that US cities lost more points than any others on the kind of ranking this year. So London did still beat kind of Geneva, Zurich, Singapore, the kind of other top centers. So what it has going for it, it's got a kind of really strong ESG ratings market, obviously really kind of solid deep capital markets offering lots of kind of innovation in green financial products. And one other thing that kind of ZEN, the organization that organizes this, called out is that it's got this kind of broader commitment to sustainability from both the national and the city government. The City of London Corporation is very kind of forward-thinking on climate. And London also comes out on top of the ranking for human capital and infrastructure and on financial markets. So this month, the London Stock Exchange is celebrating 10 years of its sustainable bond market. It's now got more than 500 bonds listed on the exchange. And I saw an interesting kind of tidbit when I was researching that. So the overall global sustainable bond market has more than $5 trillion of bonds outstanding. That's actually apparently 4 to 6 times the size of the global IPO market, which doesn't seem right to me, but, um, it's quite remarkable. Um, and then another thing to talk about is, um, the UK has always been very kind of forward-thinking on the regulatory front. And I remember, um, covering kind of EU and UK regulation in the years after Brexit. There was a lot of chat about the kind of the loss that EU regulators faced without input from the FCA. And other kind of authorities in the UK. We've obviously— we've got the sustainability disclosure requirements that came in last year, um, obviously usual grumblings, um, about implementation and how complicated it was. Um, but I was in a meeting just last week where some investors that are not based in London were saying this is a really solid policy, it's been really good at kind of improving information flows, um, from managers to investors. Um, it seems the UK kind of learned from the mistakes that the EU made with the SFDR, which works very differently to SDR. And, um, on that, so the Investment Association, which is based in the UK, they polled, uh, their members in May on the SDR, um, and found that just over a third had adopted a sustainability label for at least one of their funds. Um, that doesn't sound like that many, but I think that there's an argument to be made that that means the rule is working because it's kind of stopping investors from just labeling funds as sustainable when they're not. So if it's kind of promoting a closer scrutiny of those labels and exactly what's in the package, then I would argue that that's a good thing.

And so, I mean, was Rishi Sunak right? I mean, has his— would you say his ambition has sort of been realized, or is there still a way to go?

Yeah, it's a good question.

I mean, the world looks very different now than it did when he made that promise. I don't even know that many businesses using net zero. I think we published a piece last week that companies were kind of shying away from the term net zero. I would say on financial services, yes. It kind of remains to be seen in the rest of the economy, which is pretty large.

Indeed. And in terms of London Climate Action Week, do you expect there to be any particular focus around sustainable finance, or is the the focus going to be somewhat larger? I mean, we've obviously then got New York Climate Week a bit later in the year, which is often the real stepping stone then up to COP30.

Yeah, so the organizers of London Climate Action Week have kind of pitched it as a run-up to COP30. I would guess that London will be playing to its strengths in terms of sustainable finance is a really big focus for London. So there will be a lot of focus on that. We also do have the IFRS Foundation's annual conference happening at the start of the week, and that's, I guess, a kind of vote of confidence in London that they're hosting it here. But as you say, New York Climate Week will always be— I was speaking to someone earlier this week who described it as the bigger sister of London Climate Week. I think that particularly with this kind of change in geopolitics that we're seeing, perhaps a bit of a shift away from multilateralism, a lot of people are seeing New York Climate Week as the big one that you need to be And you will be there.

So anybody who's listening to the podcast that wants to reach out, then they can reach out and speak to Lizzie in New York later this year. Flo, yeah, you mentioned when you were speaking before about nature and climate and sort of the absence— I think also sustainability wasn't really mentioned in Rachel Reeves' spending review speech. Could you talk us through a little bit more about nature? Because obviously there are these big overlaps in terms of nature protection, restoration, and climate action. I think research shows that, you know, we can't reach— neither governments nor companies can reach their climate targets without protecting and restoring nature as is set out under the Global Biodiversity Framework. So yeah, what's happening in the UK in terms of nature in particular, because the UK's biodiversity net gain regulation was really seen as something that's quite groundbreaking and leading not just in the UK but on a global level in terms of how to marry competitiveness and the protection of nature?

Yeah, definitely. As you say, it's kind of become a bit of a cliché in the space that climate and nature are two sides of the same coin. But in the UK, many people are worried that the government hasn't quite got its head around that. So anyone listening who listens to Reeves and Starmer as much as I do will probably be sick to death of hearing about the bats and the newts. They've become really kind of the poster species from senior government officials in terms of talking about how nature nature is a blocker to growth or a blocker to building. And the now infamous £100 million HS2 Bat Tunnel is just kind of their favourite thing to point out and say, this is why nature is kind of slowing down building in this country. But kind of joking aside, it's definitely worth noting that this is part of a bigger idea for the government. This is very much a government that wants to, in their words, get Britain building. They want to build houses, they want to build infrastructure, and that means streamlining planning and reducing what they call burdens, which does include in their eyes environmental regulations. So lots of people have kind of spoken out against this, particularly kind of conservation and nature groups. And you mentioned biodiversity net gain. As you say, this was really considered an internationally forward-thinking policy and was really celebrated around the world. Government hasn't scrapped the policy, but at the end of May they did announce that they're slightly rolling it back. So for small sites, they're going have their restrictions relaxed. And also medium sites are going to have some slight changes to their restrictions. Government is consulting on this at the moment. It's not yet clear exactly what this will mean in terms of the policy, but it definitely shows an attitude within government that we want to get building. We're not too worried about these kind of issues, is what critics would say. There's also been kind of endless back and forth over the planning and infrastructure bill, as I'm sure listeners of this podcast know, it is very controversial among nature campaigners, and there has been some legal trouble with the group Wild Justice bringing forward, raising legal problems with statements made by Deputy Prime Minister Angela Rayner, where she said that the bill will not roll back the current level of environmental protection in law. They're suggesting that that's not true and that it will result in harm to nature. So that really is very controversial. It's being pushed through under urgent measures procedures, which means that it's kind of fast-tracked through Parliament. And many groups are worried that that means it's not getting the level of scrutiny that is necessary. And central to this bill is the Nature Restoration Fund. So this is essentially a mechanism whereby developers can pay into a fund to replace habitats that could be damaged in building developments. They can replace those offsite and it's not even necessarily nearby. Like, it can be further away. And in the eyes of many, this is a real issue because if you're damaging something like an ancient woodland and then just building new forests somewhere else, in terms of carbon sequestration and also habitat and the kind of entire biodiversity element, those things are not equal. And many people have pointed that out. So yeah, it's very much an issue of nature here. People are generally quite happy with what the government is doing on energy, on kind of prioritizing the shift to a renewable energy system. But there is lots of concern that this nature piece, as you talk about, the kind of other side of climate, is really missing from government rhetoric at the moment.

Yeah. And obviously, I mean, you mentioned this kind of deregulatory or simplification of regulation. Regulation agenda, which since Trump has returned to the White House, we've seen very much in the EU as well, and this real desire to sort of push competitiveness in the economy and to look at regulation as a blocker to all of this, even though we hear from lots of companies that I think we all speak to that are very sure that a lot of this regulation reporting is actually useful because it makes them have a better handle on their supply chains and helps make them more resilient to the impacts of climate change and nature loss, which is obviously a very real threat, not just to nature and climate, but also to the economy as a whole and individual companies. So Lizzie, this all sort of is supposed to come together at COP30, and it's also a COP in Brazil whereby the will has always been to sort of bring deforestation, nature, and climate together. Given that Brazil obviously has the Amazon. You know, with the US essentially out of the climate picture since it's left the Paris Agreement and it's made it very clear under Trump that there will be no climate action. The EU is also looking a little bit shaky in terms of it's discussing its 2040 emissions reduction target, which may include offsetting rather than pure domestic reduction, a little bit of pushback on various pieces of regulation. Do you see the UK as really being able to step up to the plate and lead to some kind of ambitious agreement and especially in terms of where we go on implementation from COP30, or as Flo has sort of outlined, do you think the UK as well is a bit shaky in terms of where it stands at the moment? And yeah, COP30 could be a little bit of a flop potentially.

Yeah, I'm not too optimistic about the potential kind of global leadership that the UK could show. I would say that kind of as Flo has said, I think that the way the UK is handling this kind of global shift in attitudes, and I'm not even going to call it like an ESG backlash anymore, but this shift in kind of priorities globally around sustainability and climate is quite similar to how businesses are handling it. Like, they're all kind of everyone's saying, you know, we're still doing all of the same things that we always were. We're just not necessarily shouting about it. And as Reeves kind of made clear in the spending review, like, I remember Flo saying, like, the document itself did talk about climate and did have lots in there, but she didn't choose to focus on that in her speech to Parliament. And I think that's very similar to what we're consistently hearing from businesses. I don't know who could be that voice. I don't know. Lots of excitement. I think it was in March when China kind of reaffirmed its commitment to climate and net zero. I don't know if they use the term net zero. I'm not convinced. It's also obviously worth mentioning that the UK cut development spending around the similar time that Trump was kind of gutting USAID. Again, very different world than we were in 5 years ago. Governments need to be spending more on defense. That's kind of what they've all concluded. But what we are hearing from businesses, although they are kind of saying less about sustainability, they are all insisting that they want kind of consistent, solid policy that just stays in place so that they can make plans. And so the hope will be that the UK government can kind of deliver that.

Yeah, and that's obviously quite interesting as well in terms of the spending review and the government's commitment in terms of the energy transition. There does seem to be very much that will to, to look out to 2030 and even to 2050 and to be very clear that, you know, delivery in terms of changing an energy system won't happen within this parliamentary term, not even potentially within the next one. It will take several parliamentary terms, which is quite unusual given that governments tend to look look short-term. So in terms of, yeah, business and investment, that seems, as you say, a very positive sign moving forward. But then in terms of, yes, we say the rest of the regulatory frameworks that have been in place, um, definitely look a little bit less certain. And I mean, the people I speak to in Brussels, they definitely echo what you've just said, Lizzie, that there is this kind of call for certainty, and chopping and changing is the worst thing possible in terms of business certainty and investment. And that investment that's needed for the transition, you know, globally, not just in the UK. So yeah, that's definitely something to look out for and to see in terms of Climate Action Week, both in the UK but also in New York, as to how those discussions with business are framed and how much business actually speaks out and sort of sets down that it wants this certainty going forward. Well, thanks to both of you for those insights. That was really interesting. And yeah, let's reconvene in a few weeks to see how we're doing and how this debate is moving forward. If you want to stay informed in the run-up to COP30 and beyond, Sustainable Views is the place for the latest news and policy on sustainability regulations and policymaking. Sign up for a free trial of Sustainable Views and our daily newsletter at sustainableviews.com. We'll have a new episode of this podcast with you in July. Speak to you soon.