UK Investment Could Surge If Climate Change Risks Are Better Managed Survey Reveals

British institutional investors are poised to significantly increase their UK investments if the government takes more decisive action to mitigate climate change risks, according to a revealing new survey by think tank E3G.

The comprehensive study, which gathered data from 100 companies, uncovered that 82 per cent of UK-based institutional investors harbour serious concerns about climate change impacts on their investment portfolios. Most notably, 40 per cent have already divested or reduced their holdings to protect against these emerging risks.

E3G researcher Joe Dillon emphasises two primary risk categories facing investors. Physical risks, including floods, droughts, and extreme weather events, pose immediate threats to business operations. Recent data from Munich Re illustrates this reality, with global extreme weather damage costs rising to £261 billion last year from £218 billion in the previous period.

Transition risks represent the second major concern, as fossil fuel-dependent assets face potential devaluation during the shift towards clean energy. Carbon Tracker’s analysis suggests over $1 trillion in oil and gas assets could become worthless if global climate targets are met.

The UK government’s planned consultation on mandatory transition plans for financial institutions and FTSE 100 companies could provide a framework for managing these risks. These plans would require organisations to outline their emission reduction strategies and climate risk management approaches.

Heather McKay, programme lead at E3G, advocates for consistent net zero policies and calls for a comprehensive net zero investment plan. She suggests 2025 could be pivotal, with Shadow Chancellor Rachel Reeves potentially becoming “the world’s first green chancellor,” impacting both economic growth and diplomatic relations