WATCH: The Green Innovation Conversation
Climate change is the biggest challenge that we face as a society. However, as the urgent need to respond to the climate emergency drives the development of new technologies, it also represents an enormous economic opportunity for the UK.
This was the starting point for a recent The House webinar, sponsored by L&G, which focused on how targeting investment on emerging greener technologies can deliver both economic returns, and help support the net-zero revolution.
The webinar brought together leading thinkers from politics, finance, industry, and local government to identify the opportunities that net zero represents for investment. It also considered the barriers that we need to overcome if the nation is to seize this opportunity, and the urgency of the climate challenge.
“It has taken 200 years to get where we are,” Nigel Wilson, Chief Executive of L&G tells us, “but we only have a decade or two to put things right.”
Key to “putting things right”, will be the ability to leverage pension funds to support the new, rapid growth technologies and industries which are emerging to tackle climate change.
John Godfrey, Corporate Affairs Director at L&G calls this “the power of pensions”, making reference to the £6 trillion which is in UK pension funds. For Godfrey, the big win will be connecting this capital to new, high-growth businesses which will not only deliver environmental objectives, but also generate healthy returns for fund managers.
Stephen Timms, MP, Chair of the Work and Pensions Select Committee, agrees that unlocking the power of pension funds will potentially be central to creating a net zero future. “It is important to underline just how big a contribution funds, like those managed by L&G, can make to this,” he tells us. “I think the pensions industry is going to be key.”
However, it is equally clear that this is not something which the pensions industry can deliver alone. Both the challenges that climate change presents, and the opportunities it potentially brings, are too big for any one sector to tackle in isolation.
“We need to mobilise government, business, and civic society”, says John Godfrey, stressing the need for new partnerships and relationships that adopt a whole-systems approach to investment in new technologies.
Michael Liebreich, CEO of Liebreich Associates and an official advisor to the UK’s Board of Trade agrees. Liebreich also calls for a shake-up in how the UK regards innovation, and a recalibration of attitudes to risk. “We need to start seeing things through the lens of innovation,” he argues. “We are going to have to create an environment where we are able to try new things, and they might not all work.”
This need, to find a new balance between the risks of investing in new technologies and pension funds' requirements for stable, long term growth, was also seen as critical by other speakers.
According to L&G’s John Godfrey, part of the solution has to be regulatory change, for instance making it possible for Defined Contribution (DC) pension funds to invest into growth companies working in areas such as climate technologies. Liebreich agrees, seeing 'a clear and wider role for government’ and regulators in “barrier busting”, in removing the rules that currently prevent innovation.
This sense of culture change underpinned the contribution of all of our speakers, driven by a sense of both the scale and the complexity of the issues that we face.
However, what was equally clear is that if we can get this right, the economic and environmental goals will potentially be enormous.
“A big part of economic development over the next 40 or 50 years is going to be about the reorientation of the economy to deal with the challenge of climate change,” says Stephen Timms. “There are enormous opportunities in that if we come up with the innovations that are needed.”
Michael Liebreich also believes that if we can create a trading environment that supports innovation, and helps shape new markets, then the impact could be transformational. “If we get that right”, he says, “the prizes, for the planet and for UK PLC are absolutely tremendous.”
To make this happen will require new partnerships, new technologies and a shift within financial services to create a culture where consideration of climate impact becomes second nature.
It will also require a movement from words to actions. “Promises and pledges are important first steps,” says Nigel Wilson, “but the real change happens when the shovel hits the soil. When we see real action taking place”.
What is clear from all of our speakers is that investing in new, innovative high-growth sectors could give the UK first-mover advantage in shaping a net zero future. With the right relationships, regulatory frameworks, and political leadership in place, pension fund investment could turn out to be a critical tool in helping us to shape a greener, cleaner future.
Visit our Green Innovation Conversation hub to find out more about how investment can unleash the power of innovation
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