Private capital is “critical” to helping the UK transition to a net zero economy by 2050, according to UK Private Capital, which has called on the government to support its contribution to climate resilience with policy interventions.
A new report from the association – formerly the British Private Equity and Venture Capital Association – outlined how the industry’s long-term approach to ownership, and emphasis on backing SMEs and scaling innovative businesses makes it “a key player” in meeting the UK’s sustainability goals.
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UK Private Capital has set out a series of recommendations to maximise private capital’s ability to support the green transition, including accelerating the deployment of pension investment into private capital.
Last year, 17 of the UK’s largest pension providers signed the Mansion House Accord, pledging to invest at least 10 per cent of their defined contribution (DC) default funds in private markets by 2030.
The association urged the government to ensure that the Mansion House Compact commitments are met, as levels of investment into private capital by the UK’s DC pension funds remains “low”, and to ensure Local Government Pension Scheme pools expand place-based and regional private capital allocations.
In its report, UK Private Capital also urged the government to ensure sustainability regulation and reporting continues to deliver “decision-useful data”, rather than being “a tick-box exercise”.
It said the government must ensure that regulation avoids public-markets-only frameworks, “reducing the risk of unnecessary burdens which can slow capital flows”.
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The private capital industry invested more than £29bn in UK businesses in 2024, and the industry has raised £190bn of dry powder, which is likely to be invested over the next three to five years, according to the association.
It also pointed to the role that investors play in helping unlisted, and often high-emitting, businesses work towards decarbonisation over an average six-year investment period.
“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,” said Michael Moore, chief executive of UK Private Capital.
“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.”
Lucie Mills, partner at NorthEdge and chair of UK Private Capital’s sustainability committee, added: “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.”
UK Private Capital is the industry body and public policy advocate for the UK’s private equity, venture capital and private credit sectors.
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