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Pillar Two: Unleashing Investment Capacity


Our member investment capacity could support up to one-third of the total c£2.7trn of investment needed up to 2035 to hit the UK government's Net Zero target (which assumes a 78% reduction in carbon emissions against the 1990 baseline by 2035) - equivalent to c£60bn of investment from our sector each year.

However, unlocking the full investment capacity requires an increase in the supply of opportunities, reductions in complexity of the investment process and improvements to the financial attractiveness of the available investments.

Despite our sector being well-positioned to invest for the long-term and having capacity to deliver a significant proportion of the required Net Zero investment, barriers exist to full deployment of ABI members’ investment capacity.

Action is urgently required to address these constraints – the Government has an opportunity to act now to ensure as much of the insurance and long-term savings sector’s investment potential as possible is deployed, but time is running out.

Progress Update

We strongly welcome the Government’s ongoing commitment to reforming the Solvency II regime and introducing Solvency UK.  

These reforms can unlock £100billion for investment in productive infrastructure and the transition to net zero, while maintaining world leading standards of policy holder protection.  

We look forward to continuing to work with the Government to implement these important reforms. To maximise our sector’s investment capacity, it is crucial that the Government provides a clear pipeline of investment opportunities. It is important that the Government continues to send strong signals to markets about the growth opportunities it sees in Net Zero technology to enable sustained investment. 

We therefore welcomed the publication of the its plan to strengthen Britain’s long-term energy security and independence, ‘Powering Up Britain’. 

It is right for this strategy to emphasise speeding up delivery of large-scale energy projects alongside targeted support for technology innovations where the UK can become a world leader. 

As a sector that offers both investment capacity and risk management expertise, we urge the Government to work closely with our sector to support these projects to be a success.

There are a number of actions we want to see the Government (and other key stakeholders driving forward:

  • Continue to regularly offer green bonds, including at local authority level
  • Increase the pipeline of investible projects by making the design of long-term investment pathways part of the criteria for approving any Government-enabled financing for green technologies and infrastructure
  • More collaboration between financial regulators (Bank of England, FCA, The Pensions Regulator) and counterparts in the real economy (especially Ofgem and the Environment Agency)
  • Consistency on regional and local investment through UK Infrastructure Bank’s Local Authority Advisory Service and the proposed ‘Green Jobs Clusters’
  • Ensure that infrastructure project planning prioritises resilience to the impact of climate change, not just emissions reduction
  • Maintain drive to make the UK a leader on voluntary carbon markets – allowing firms to unlock investment while meeting their Net Zero targets and providing transparency on ESG to savers

We continue to work closely with our members to respond to the ongoing consultation on Solvency UK and to ensure that we have the right framework to deliver on the investment opportunities that will come with effective implementation of these reforms.  

We will continue to provide regular updates on this activity throughout the rest of 2023.