The UK prime minister Boris Johnson’s announcement that the UK will end direct government support for the fossil fuel energy sector overseas “as soon as possible” has been welcomed by ESG investment industry professionals.
The move, which will see the UK end export finance, aid funding and trade promotion for new crude oil, natural gas and thermal coal projects, was announced ahead of the Climate Ambition Summit on 12 December.
“The UK government’s announcement over the weekend that it is to no longer finance overseas fossil fuel projects signifies that renewable energy really is the future,” said Tom Williams, partner and head of infrastructure at Downing.
“A net zero commitment means taking all actions necessary to halt new sources of emissions, diverting investment into clean, sustainable forms of generation. As costs of wind and solar have plummeted around the world, the investment case has become ever-clearer, and there is a genuine need to avoid investing in what will likely become stranded fossil fuel assets.”
This announcement builds on the government’s positive momentum towards next year’s crucial COP climate talks, exemplified by the UK’s recent 68% carbon emissions reduction target, said Ben Constable-Maxwell, head of sustainable and impact investing at M&G.
“The commitment to end support for overseas fossil fuel projects reflects the importance of taking a holistic approach to tackling the climate crisis and recognises our responsibility as a rich nation to support the low-carbon transition globally, rather than holding to high-carbon policies that do the opposite.”
“As we head towards Glasgow, we need to clear the path of arcane policy roadblocks likely to hold back urgent progress. Greater ambition is still needed, but this new commitment is an important step in the right direction.”
In the lead-up to the UN summit in Glasgow next year, Susana Coutinho, research associate at MainStreet Partners, said the announcement was a “good effort to show leadership”.
“She said it also sends a very a strong signal to the international community that governments’ support of the fossil fuel industry is coming to an end. Following China’s recently announced net zero target and renewed intent towards preventing further environmental destruction from the US, this announcement from the UK will put increased pressure on other countries to follow suit with more ambitious commitments.”
Stephanie Pfeifer, CEO of the Institutional Investors Group on Climate Change (IIGCC), said: “IIGCC welcomes the UK government’s announcement to end direct taxpayer support for fossil fuel projects overseas. The global economic transition to net zero will be secured through both the private and public sectors committing to real action.
“We hope to see more commitments from international policymakers signalling progressive action in support of the Paris Agreement in the coming months as we look ahead to COP26.”
