The impact investing market is now worth more than £58bn in the UK.
With the twin effects of regulation (around environmental, social and governance labelling and the task force on climate-related financial disclosures in pensions) and heightened public consciousness, climate-related considerations for financial planning are here to stay.
So, how can financial advisers reassure and guide clients amid the political populism and media bluster swirling around climate change commitments?
The first thing to note is that advisers are now speaking to clients who have personal lived experience of a changing climate; extreme weather at home, on their holidays and in news headlines is part of their reality.
We have seen the ebb and flow of government commitment to environmental policies before and we will again. In 2013, David Cameron wanted to “cut the green crap” and now Rishi Sunak wants to rollback net-zero deadlines.
But climate change is a global challenge and requires a global response. Sunak is a focus for us in the UK, but meanwhile in the US, Australia and Brazil new, more ambitious targets are being put in place.
In the end, the trajectory is still upward. The clear direction of travel for the global economy is towards net zero.
Long-term planning aligned with client risk appetite and objectives is the backbone of good financial advice. We are now seeing the beginning of the end of the fossil fuel age.
Undeniably, the companies enabling the transition to a net-zero economy are still destined to be the industrial powerhouses of the future. The investment case for these businesses is unchanged.
For companies such as those in the transport, energy and real estate sectors, Sunak’s unscheduled announcement on September 20 adds to business planning uncertainty. The result will inevitably push up costs in both financial and environmental terms.
This is very unfortunate. Battery electric cars, although typically more expensive to buy today, are also dramatically cheaper to run, and overall save consumers money. Some models are expected to be cheaper to buy within two years.
Cameron’s decision to ban onshore wind and measures to increase home energy efficiency is reported to have added £2.5bn to UK energy bills.
By disincentivising and attempting to slow these shifts, people will end up paying more for longer. Precisely the opposite of Sunak’s claims to be reducing “unacceptable costs on families”.
The markets for wind power, electric vehicles and efficiency technologies are global. Sunak’s decisions will not stop growing numbers of consumers and businesses purchasing these technologies, but it will slow their growth in the UK.
Our view though, is that interest remains as high as ever in the much larger markets across the EU, US and China.
