• Expand HM Treasury's mandate to incorporate net zero and lead on developing a National Transition Plan which would help to unlock further regional investment in climate solutions;
• DWP should convene a 'Fiduciary Duty Industry Taskforce', to evolve climate considerations for pension investments; 
• Relevant regulatory and legislative reform of pensions should be accelerated, such as increasing default auto-enrolment contributions from 8% to 12%.

Phoenix Group, the UK’s largest long term savings and retirement business, is today making four major net zero recommendations in a new policy paper, Charting the UK’s Net Zero Future: Policy Recommendations to Unlock Investment.

The recommendations comprise key policy priorities that government should focus on in the early days of a new Parliament. They include a call to expand HM Treasury’s mandate to incorporate net zero and to lead on a national transition plan which should help unlock regional investment in climate solutions, and a proposal for DWP to set up a “Fiduciary Duty Industry Taskforce”.

The policy paper has been informed by a series of roundtable discussions held earlier in the year in collaboration with the Association of British Insurers’ Investment Delivery Forum. Attendees included government, industry bodies and MPs alongside a wide range of organisations. It also builds on proposals contained in Phoenix’s November 2023 report, Unlocking Investment in Climate Solutions, which found that with the right reforms on the right terms for pensions savers, UK pensions funds could quadruple their investment in UK climate solutions to up to £1.2 trillion between now and 2035. This level of investment would account for half of the gross capital investment in climate solutions needed for the UK to remain on track with its net zero transition.

Phoenix Group’s recommended policy interventions to unlock investment in climate solutions and catalyse the net zero transition:

1. Develop a National Transition Plan

• Create an economy-wide National Transition Plan that encompasses sector-specific strategies, roadmaps with clear milestones and policy levers across pricing, regulation and support;
• Embed a capital raising plan within a National Transition Plan to support low-carbon investments;
• Expand HM Treasury’s mandate to include net zero, including leading on the development of the National Transition Plan;
• To ensure successful delivery, net zero needs to be embedded as a priority across multiple departments, with activity between departments coordinated by an Office for Net Zero
• Expand the Office for Budget Responsibility’s remit to include measuring and tracking progress against net zero goals and holding the Government to account on delivery of the National Transition Plan.

2. Focus on unlocking regional investment in net zero,

• Create an investor advisory body to work with the Department for Energy Security and Net Zero (‘DESNZ’) to build the skills and capacity in local authorities needed to build investment pipelines of climate solutions;
• Endorse Local Area Energy Plan Guidance as the national framework for place-based whole energy system decarbonisation planning, to encourage regions to develop consistent local transition plans;
• Simplify funding pots and encourage use of financing mechanisms to crowd in private sector capital;
• Embed net zero considerations at the heart of further devolution deals and fund further City Leap Replicators across the country.

3. Evolve climate considerations within fiduciary duty

• Establish a Fiduciary Duty Taskforce to maintain momentum from the FMLC paper to build industry capacity to manage climate change and wider sustainability factors;
• Evolve the Value for Money framework to consider private markets investments for defined contribution savers in line with initiatives such as Mansion House Compact;
• Support consolidation of pension schemes in order to improve standards of governance and encouraging the scale necessary to facilitate greater investment in private markets net zero solutions.
  
  

4. Accelerating regulatory reform and legislative pensions reform

• Increase default auto-enrolment contributions from 8% to 12% so that people have a decent income in retirement, that in turn boosts pensions investment in productive finance;
• Reduce duplication between regulators to simplify the regulatory landscape for Pensions and Insurers sectors;
• Support defined contribution savers through consolidation of schemes;
• Support Solvency II reform through introduction of a Matching Adjustment sandbox.

Phoenix Group believes that if the new Parliament moves quickly to identify the right priorities, set the agenda across relevant departments, and implements effective delivery programmes, it will have the potential to make significant early progress towards delivering net zero.