The UK is racing to build a greener future and take the lead in driving sustainable finance. Bold policies like the Labour Party’s Green Prosperity Plan and the National Wealth Fund have been launched with the aim to drive investment in sustainable infrastructure. But turning ambition into action isn’t easy. The real challenge lies in unlocking capital at scale, creating a stable investment climate and bridging the gap between government policy and private sector needs.
An OMFIF roundtable in January brought together experts from the Department for Environment, Food and Rural Affairs, the City of London and the National Wealth Fund to examine how best to scale capital for green infrastructure. The discussion underscored the critical role of public-private collaboration, innovative financing mechanisms and targeted policy interventions in achieving the UK’s climate and economic objectives.
Achieving net-zero targets will require substantial investment in clean energy, green infrastructure and nature-based solutions. Conclusive government policies that align with private sector investment needs are essential to attract the necessary capital and overcome existing barriers.
Fuelling green growth and policy alignment
The National Wealth Fund has been designed to catalyse green investment, improve private sector participation and de-risk projects, while balancing financial sustainability with environmental and societal benefits. However, regulatory uncertainty, lengthy approval processes and a shortage of skilled workers continue to create hurdles by delaying projects and increasing costs for investors.
At the same time, fragmentation across sectors is slowing progress. Disjointed energy, manufacturing and resource management policies make it harder for investors to navigate the green finance landscape effectively. Without better coordination across government departments, capital deployment will remain inefficient. Speakers at the discussion emphasised the need for centralised frameworks that bring together policies, financing strategies and infrastructure development plans to remove barriers to investment.
The UK remains a global leader in sustainable finance, with established strengths in carbon markets, insurance and regulatory frameworks. However, transition finance, which supports industries in decarbonising, remains underdeveloped. Regulatory fragmentation, market hesitancy and a lack of clear, principles-based guidelines have slowed progress. Greater trust and transparency will be needed to unlock further investment opportunities.
Breaking barriers to transition finance and adaptation
Complex regulatory frameworks and slow project approvals continue to restrict the flow of private capital into green projects. Investors frequently cite uncertain policy landscapes and inconsistent regulations as major barriers to increasing their exposure to sustainable investments. A more agile regulatory environment – one that reduces administrative hurdles while maintaining accountability – will be crucial.
To combat this, public-private partnerships could help de-risk large-scale green investments, particularly in early-stage projects where private capital is often reluctant to engage. Adopting principles-based regulation would also create greater flexibility, allowing investors to respond to emerging technologies and sustainability opportunities without being constrained by outdated frameworks.
Beyond decarbonisation, investment in climate adaptation and nature-based solutions remains underdeveloped. Adaptation projects, such as sustainable agriculture, flood prevention and biodiversity restoration, offer long-term resilience benefits but often struggle to attract private capital due to unclear return profiles and data limitations. The roundtable discussion highlighted the need for government-backed financial mechanisms to reduce investor risk in these projects. Aligning public incentives with private sector expectations could create new pathways for capital to flow into adaptation finance.
Building a workforce for the green economy
The UK is facing critical shortages in engineering, clean energy and resource management. Yet, effectively delivering the energy transition requires a skilled workforce. Without targeted investment in workforce development, green infrastructure projects could face delays and rising costs.
Collaboration between industry, academia and government must serve to ensure that educational initiatives align with market needs. Expanding apprenticeship programmes, vocational training and research partnerships will be essential in developing a workforce capable of supporting a low-carbon economy.
The path forward
Attracting long-term green investment in the UK requires a critical three-pronged approach of regulatory reform, public-private collaboration and better workforce development. Simplifying regulatory frameworks will remove barriers, while stronger coordination across government can tackle systemic challenges. Institutional capital, including pension funds, must also be mobilised to finance sustainable projects at scale.
At the same time, innovation in clean energy and resource efficiency must be supported to help startups and emerging technologies scale effectively. Strengthening investment in climate adaptation and nature-based solutions will also be key to building resilience in the face of climate change.
By addressing these challenges head-on and aligning policy with investment needs, the UK can reinforce its position as a global leader in sustainable finance. The transition to net zero is not just an environmental necessity, it is an economic imperative.
Emma McGarthy is Head of the Sustainable Policy Institute and Yara Aziz is Economist, Economic and Monetary Policy Institute at OMFIF.
Image credit: Keir Starmer
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