The IA: investors call for a competitive Budget which will aid green transition

Investors are urging the Chancellor to use his upcoming Budget to ensure the smooth transition to the green economy of the future, boost the competitiveness of the UK economy, and support a strong savings and investment culture.

As the country prepares to host COP26, the Investment Association (IA) is calling on the Chancellor to bring forward a series of measures in his Budget that will ensure the UK remains a leading international financial services hub, and allow the investment management industry to play its part in the global fight against climate change. These include:

·         Building on the delivery pathways outlined in the Treasury’s Net Zero Strategy, to develop clear, long-term sector-specific net zero transition plans. Further detail on these pathways is needed if the investment management industry is to support transition in different sectors of the economy and factor climate risks more accurately into investment decisions.

·         Working with the investment management industry to identify specific sectors or projects which align with the goal of net zero transition and where additional investment is needed. This could focus on sectors, nascent technologies, or underdeveloped overseas markets, and should consider appropriate mechanisms to crowd in private finance.

·         Supporting long-term investment and broadening investor access to long-term, illiquid assets, both in the UK and globally. The Long-Term Asset Fund (LTAF), which the IA pioneered, needs to have a broader distribution within the retail market than currently envisaged under the FCA’s draft rules.

·         Creating a supportive regulatory culture, with competitiveness hardwired into it. The UK is in a unique position to update its regulatory framework following the UK’s departure from the EU and ensure that it remains appropriate to meet the social, economic and geopolitical challenges that lie ahead.

·         Ensuring that the UK has a tax regime that is competitive, stable and predictable, so that businesses have the confidence to make long-term decisions.

·         Protecting the UK’s international outlook so that world class investment talent continues to bring their expertise to the UK - one in five of those employed in UK investment management are from outside the UK, and this gives the UK a key competitive edge.

·         Allowing UK capital markets to thrive, which play a vital role in advancing opportunities for both investors and businesses. This must be underpinned by continual improvement to the UK’s stewardship and corporate governance practices.

Chris Cummings, Chief Executive of the Investment Association, said: “This is a vital budget. As we emerge from the pandemic and accelerate towards a greener economy, action and clarity from the government is critical in order to ensure every corner of our country thrives.

“As we look ahead to COP26 next month, we hope to see further measures announced by government to aid the UK’s green transition. Underestimating the severity of climate change will undermine the basis on which our economy, businesses and jobs are founded. The investment management industry recognises we must change course now in order to protect the savers we serve. UK savers put almost £1bn a month into responsible investment funds last year, showing how important investing in a way which supports our communities has become.”