UK Chancellor Rishi Sunak has confirmed a £3bn green investment package to create jobs and decarbonise parts of the economy in a Covid-19 recovery plan
Sunak committed to a “green recovery” in the UK with a £2bn Green Homes Grant under which “homeowners and landlords will be able to apply for vouchers to make their homes more energy efficient and create local jobs”, while £1bn has been earmarked to improve the energy efficiency of public sector buildings.
The Chancellor added today’s announcements was part of a £30bn package that is the second phase of the three-part Covid-19 recovery plan and was focused on protecting and creating jobs. He warned “hardship still lies ahead” amid “profound economic challenges”, but said “no one would be left behind”.
Green jobs
Sunak went on to unveil plans to create green jobs amid a recovery plan with “concern for our environment at its heart”.
From September, the £2bn Green Homes Grant will allow homeowners and landlords to apply for vouchers to increase the energy efficiency of their homes and create sustainable work for local businesses.
These vouchers will be able to cover at least two-thirds of costs, up to £5,000 per house, rising to up to £10,000 to cover the full costs for low-income households.
Additionally, £1bn will be spent improving the energy efficiency of public sector buildings – such as schools, hospitals and council buildings – and a £50m fund has been set up to pilot an effective approach to decarbonise social housing.
It was estimated these measures would make a total of 650,000 homes more energy-efficient, saving families £300 a year, as well as cut carbon emissions by half a megaton a year and help support around 140,000 green jobs.
Investment industry reaction
Carlota Garcia-Manas, senior responsible investment analyst at Royal London Asset Management, said the firm welcomed the announcements: “As a nation we have a great opportunity to create a more sustainable future and long-lasting economic recovery by helping people back into green jobs and building long-term, sustainable infrastructure and green buildings.
“This much needed support for green jobs and vulnerable households is welcome, and will support companies in delivering a just transition to a low carbon economy.
Speaking ahead of the statement, Jennifer Wu, global head of sustainable investing at J P Morgan Asset Management, said: “The Chancellor’s announcement could incentivise investors looking to allocate additional capital to investment opportunities arising from the transition to a cleaner economy.
“The UK’s ambitions of achieving net zero by 2050 will require a full policy package that not only focuses on low carbon infrastructure, green innovation and technology but also supports workforce skills training to deliver these green ambitions.
“We should use this momentum to help make the UK’s economy not only stronger but also greener and more resilient.”
David Zahn, head of European fixed income at Franklin Templeton, said the economy is on a long road to recovery from the damage caused by Covid-19, but said the green recovery plans should support the green bond market: “There was a focus on green investment in the housing stock to further the goal of greening the economy. There will be further incentives of this nature to support the economy as well as reduce carbon emissions.
“This green focus will likely be repeated around Europe but especially in the EU recovery fund. Christine Lagarde refocused markets on combating climate change by suggesting the ECB asset purchase programme will pursue green objectives. Overall, fiscal and now monetary policy are moving quickly to support the greening of the economy, and this should be very supportive of the green bond market and allow it to continue to expand and diversify.”
Dzmitry Lipski, head of funds research, interactive investor, said the £3bn ‘green package’ aims to cater to growing calls for economic recovery plans from the Covid-19 pandemic that are not at the expense of the planet, but whether the measures announced are an adequate first step to ‘build back greener’ and help achieve the Government’s broader target to cut greenhouse gas emissions to net zero by 2050 is open for debate.
“From an investment standpoint, the creation of thousands of green jobs, along with the wider £5bn of infrastructure spending package, will strengthen the foundations of the construction stocks – many of which saw work grind to a halt because of lockdown guidance as well as disruptions in supply chains resulting in problems sourcing the required materials.
“But these stocks aren’t out of the woods yet. Depressed office and retail occupancy rates could be an anchor to growth prospects despite the recent uptick in UK construction activity in June, and it is arguably property developers that are likely to be the net beneficiaries.
“Aside from property, it is funds and trusts with exposure to the low carbon economy that are likely to benefit.
“We like the Royal London Sustainable Leaders Fund, which is on our ACE 30 rated list of ethical funds and investment trusts. The high conviction UK focused fund invests in stocks deemed to deliver a net benefit to society, in terms of the products and services they provide or that show leadership in environmental, social, and governance management. The low carbon economy is one of its themes.
“We also like VT Gravis Clean Energy Income (also on the ACE 30 rated list) which is a diversified portfolio of global listed securities of companies involved in the operation, funding, construction, generation and supply of clean energy, but has a big chunk of its assets in the UK.”
Emma Wall, head of investment analysis at Hargreaves Lansdown commented Sunak’s pledge for “a green recovery with concern for our environment at its heart” was a step in the right direction.
“[The measures are] all creating green jobs, bringing new skills to the table and creating a well-adapted economy.”
She added savers clearly agree with the Chancellor that investing ethically is of increasing importance – with flows into ESG, ethical and sustainable funds up an incredible 13 times over the past five years on the Hargreaves Lansdown platform.
“Responsible investing funds have been steadily growing in popularity in recent years, as the quantity and quality of funds available to investors has increased. But 2020 has seen record inflows on the HL platform, up 216% on the previous year, as investors put their money to good, green funds outperform their sin-stock cousins, thanks to a lack of exposure to poorly performing sectors such as oil.”
