The UK’s road to net-zero

“The environmental challenges ahead of us are global and systemic. To tackle them, we all need to collaborate and act together. We are all deeply interconnected through the flow of goods, services, resources, people, ideas and above all – by information,” says Renato Beltran, Corporate Coverage UK at SEB

According to Renato Beltran, the sustainable transition will mainly be driven by two things: policies and regulations and the speed and direction of capital flows.

“Capital flows will dictate the pace of this acceleration,” he says.

However, the transition has been slowed down by global factors such as inflation, the war in Ukraine, energy security and supply chain disruptions.

“Personally, I think that this slowdown is temporary. As soon as Europe and the US address some of these issues, the pace of the sustainable transition will accelerate at speed”

Which actions will have the best results?

“The way I see it, everything starts with education – education across the board – and that includes politicians, public servants, regulators, financiers, businesses, investors, and the population at large. This is well underway, but we need to do more. We also need to rely on science – be fact-based – and develop a mindset of future-proofing everything that we do, to make sure that we are doing the right things for the right reasons”.

Renato points out four collective actions that are important for a sustainable transition: regulations and policies, transparency in reporting, new, sustainable business models for companies and behaviour from individuals who basically drive the demand of products and services and to a great extent the circular economy.

The UK was the first major economy to set in law the ‘net zero’ target by 2050. In November 2020, a Ten Point Plan for a Green Industrial Revolution was outlined by the government then in charge.

“For us it is key to deliver on this plan that will mobilise ￡12 billion of government investment. Also, the private sector is expected to invest at least ￡42 billion in areas such as energy, transport and mobility, homes and buildings, nature and innovation and finance. But now, we will need to assess the new Government’s strategy”.?

Industry impact

Renato says that all industries will be impacted by the transition, the most obvious being the energy and the transportation and mobility sectors.

“The sheer scale of the current energy security crisis, coupled with the transition to electrification of the transportation system, will make these two industries the top priority in the short to medium term. Also, the UK needs to minimize its dependency on the import market”.

To achieve that, we must continue to build renewable and sustainable sources and utilise some of the transitional fuels, such as nuclear power and gas for some time. The energy mix will be very critical, and the expectation is that electricity generated from nuclear will increase to 25 percent by 2050, from around 16 percent today in the UK. Special attention has to be given to green-tech innovation which will make processes more efficient and cleaner”.

Another industry that has to do better in the UK is the housing sector, and according to Renato the government needs to find ways to encourage and provide incentives for better insulation of residential and commercial real estate as well as public buildings.

“Some of the solutions will probably include the use of heat pumps, replacing gas boilers with electric boilers, adding solar panels and so on. Right now, it is too expensive for individuals to insulate their properties without any incentives to shorten the payback period”.

It will take time

As much as he would like the sustainability transition to happen more quickly, he believes it will take time.

“It’s a complex matter that involves too many stakeholders with different interests in different countries. Everyone involved is advancing at different speeds and embracing sustainability differently – this is why short-term targets are also important.

Our net zero target in 2050 is a long way away, and without interim milestones it is difficult to measure our progress. So, we will need to have checks and balances in place, to ensure we are on the right track.”

He points out that water and biodiversity – including natural capital and carbon offsets – will be talked much more about in coming months and years.

“These will become the next priority”, Renato says.

Since 1856, SEB has supported companies and society at large by investing in thought-leading ideas and offering innovative financial solutions to meet our ever-changing needs. Now we play an important role in financing one of the most urgent shifts yet – the transition to a low carbon economy.

We want to be the best partner possible on your sustainability journey, offering advice on new ways to invest and access capital. We understand the challenges ahead, but we also see the opportunities. Together let’s ensure a healthy future for generations to come.

Learn more:?Your sustainable transition partner | SEB (sebgroup.com)