Policy interventions can accelerate private capital’s contribution to reaching net zero targets
UK Private Capital (formerly the British Private Equity and Venture Capital Association) is calling on the Government to maintain its leadership on the pensions agenda and ensure sustainability regulation and reporting does not become a tick-box exercise, to support the private capital industry’s significant contribution to the UK reaching net zero by 2050.
The association’s new report, Investing in tomorrow: Private capital’s role in the green transition outlines how the industry’s long-term, hands-on approach to ownership, and its emphasis on backing SMEs and scaling innovative businesses makes it a key player in the UK’s sustainability journey.
Private capital plays a key role in closing the green financing gap
The private capital industry invested over £29bn in UK businesses in 2024, and the industry has raised £190bn of dry powder, which it expects to invest over the next three to five years. This investment forms part of the tens of billions in additional investment needed for the UK to reach net zero by 2050. Investors also play a critical role in helping unlisted, and sometimes high emitting businesses work towards decarbonisation over an average 6-year investment period and beyond.
In the report, UK Private Capital sets out a series of recommendations, intended to maximise private capital’s potential in supporting the green transition, including:
- Accelerating the deployment of pension investment into private capital: Given the continued low levels of investment into private capital by the UK’s Defined Contribution (DC) pension funds, the Government should continue to provide leadership to ensure that the Mansion House Compact commitments are met.
- Increasing capital flows into climate tech VC: Venture capital investors support domestic, early-stage green technologies that align with net-zero ambitions. They need easily deployable and replicable innovative finance mechanisms that can absorb risk and support longer investment horizons.
- Establishing competitive regulation: Government must ensure that regulation avoids public-markets-only frameworks, reducing the risk of unnecessary burdens which can slow capital flows.
- Reporting requirements that inform decisions: Government must ensure reporting requirements remain focussed on materiality, prompting disclosures that genuinely inform decision making while avoiding disproportionate demands on smaller entities.
UK Capital recently launched the Sustainability Reporting Hub, designed to reduce reporting complexity for firms. The Hub maps out existing resources to help firms at every stage of the investment process by clarifying the role, purpose and interaction of existing sustainability frameworks and reporting templates used by LPs, GPs and portfolio companies.
“Our industry is a natural partner for the Government’s commitment to reach net zero by 2050, possessing deep pools of capital, a wealth of strategic experience and a focus on long-term value generation.
“That is why we are calling on Government to take action to ensure adequate financing and competitive regulation and reporting is in place, in order to unlock the potential of private capital in the green transition and ultimately deliver the best financial returns.”
“The private capital industry’s contribution could be even larger with a policy framework that supports the industry in its efforts to finance the green transition and a regulatory and reporting environment that drives sustainable outcomes in businesses across the economy.”
Notes to Editors:
The report was launched at UK Private Capital’s Sustainability Conference on 21 April in central London.
For further information, please contact:
UK Private Capital Press Office
Email: [email protected]
Background:
About UK Private Capital
UK Private Capital is the industry body and public policy advocate for the private equity (PE), venture capital (VC) and private credit ecosystem in the UK. With a membership of 600 firms, we represent UK-based private capital firms, as well as their professional advisers and a large base of UK and global investors. The private equity, venture capital and private credit industry has a vital role to play in driving national and regional growth. Currently over 13,000 companies, employing more than 2.5 million people, are backed by private capital investment in the UK.
