Stuart Irwin acknowledged that LV set an ambition to be Net Zero by 2050, in this financial year, and it was now in the process of developing interim targets to help underpin this transition. LV is also in the early stages of considering investments in climate solutions as part of meeting its net zero targets.

Rob Price highlighted that many insurers were still at the early stages of considering climate solutions and that structures to back up some of the investment risks would have to be in place to scale them up.

Steven Penketh responded to this challenge, pointing out that the Treasury is due to meet with the ABI in January 2025 to discuss how the government could incentivize investments in climate solutions, beyond easing Solvency II restrictions. He noted that it is essential to move from an abstract approach, and to start to consider specific sectoral investment solutions – it was time to turn theory into practice.

Part of the solution could be the creation of central ‘green transition funds’, where government, the National Wealth Fund and private investors (on both the demand and supply side) came together to create sector specific funding platforms.  These could make loans to infrastructure developers (instead of grants) that were funded by bonds issued to the insurance and pension sector. He suggested that this could also offer a solution to the Matching Adjustment Ineligibility challenge which insurers often face, as the bonds they invest in could be structured to meet the relevant requirements.

Eamonn Flanagan challenging this view somewhat, raising the question whether it might not be quicker to target the PRA directly on matching adjustment eligibility.

Linda Zuberi added that while Beazley has got a net zero target in place, the insurer is now increasingly placing the emphasis on funding the transition. “We want to commit to transition assets. Regulatory capital requirements get somewhat in the way of it but there are still ways of including transition assets in your portfolio by making them relatively small scale. It is frustrating, many transition assets have a shorter duration than other infrastructure assets, making it harder for insurers to invest in them” she added, stressing that a government wrapper would be helpful.

Price noted that there appeared to be a disconnect between the government’s ambition to encourage greater insurance investment in illiquid assets and regulatory requirements on matching adjustment assets. “You would have thought that the government should be in a position to instruct the regulators on what their objectives are.”

Flanagan made the case that no one in the industry was expecting the government to eliminate investments risks: “We are not after guarantees, risk is what we do, it is our job to assess and calibrate default risks. 

“We are not looking to the government to provide guarantees forever, but we can’t take these risks in the rigid environment we are in at the moment,” he added.

The discussion subsequently turned to key elements of insurance portfolios, assessing how investors can reduce the carbon footprint of their fixed income and equity holdings.

Sharing his experience, William Gibbons argued that some of the investors he worked with had been able to implement net zero strategies effectively whilst investing in a suitable active manager. Others, who had pursued passive approaches had focussed on sustainable indices, a process which turned out to be lengthier. He also highlighted the challenges of exercising stewardship across bond holdings.

Rob Giles explained that Hiscox, like most insurers, remains predominantly invested in bonds. The firm has significant investments in green bonds and unlike life insurers, its assets tend to have a shorter duration, with the average liability being at two years. Nevertheless, he added that there was scope to increase sustainable debt allocations.

Salina Pillay shared that BUPA has a net zero by 2040 target. With the portfolio so far being invested rather conservatively, sustainable debt appeared to be the “more natural fit”.

Linda Zuberi added that 80% of Beazley’s assets were also invested in investment grade fixed income managed in-house. Meanwhile, the insurers’ equity holdings were outsourced and invested in Paris-aligned tracker funds. “There is only so much you can do in public markets, where you have the greatest impact is in the private markets space where we as a general insurance company have only limited exposure. We do have an impact portfolio of private instruments and that is where we have measurable impact,” she added.

Her views were echoed by David Linehan, who flagged that Legal & General Capital had been set up to facilitate among others small direct investments in climate solutions, venture capital, infrastructure and core housing assets. This process is now on track to be accelerated by the merger with Legal & General Investment Management. “We have got a very big fixed income business but if you really want to drive that impact you have to do it in private markets and you have to develop your own capabilities” he argued.

Sara Kalukenda shared insights into RiverStone’s investment strategy and its alignment with sustainability objectives. She explained that the portfolio focuses heavily on fixed income assets, given the company’s emphasis on liability-driven investments. However, Kalukenda noted a growing allocation toward green and sustainability-linked bonds to support decarbonisation efforts: “While our core portfolio remains in traditional fixed income, we see green and sustainability-linked bonds as an important step toward integrating ESG considerations without compromising on risk-adjusted returns.”

Kalukenda also discussed RiverStone’s increasing interest in private markets, particularly renewable energy and infrastructure projects. “We are exploring investments in areas such as energy storage and grid resilience, which not only align with our ESG goals but also present strong long-term growth potential.” She emphasised that the firm is committed to balancing its fiduciary duties with its sustainability objectives, adding: “It’s about finding that sweet spot where financial and environmental returns converge.”

Irwin highlighted how LV’s with-profits focus stands out among other insurers at the summit, which is reflected in a relatively higher allocation to equities. Equity investments can provide greater scope to influence decarbonisation through shareholder engagements and voting action. We can also skew our portfolios to investments with enhanced sustainability and ESG credentials. While fixed income remains central to ensure liability matching, LV has been actively integrating sustainability considerations across all asset classes. Irwin also emphasised LV’s growing interest in private markets, to make an even greater impact on climate, particularly within the infrastructure space”.

Green bonds, which raise capital exclusively for environmentally beneficial projects, have long been favoured by insurers for their simplicity and transparency. However, several participants expressed reservations about their effectiveness in driving real-world decarbonisation.

William Gibbons noted that while green bonds are a step in the right direction, they can fall short: “The lack of transparency and robust reporting in green bond markets means it’s difficult to assess whether the capital genuinely leads to additional environmental outcomes.”

This sentiment was echoed by others who argued that green bonds often finance projects that would have occurred regardless of the bond issuance. In contrast, sustainability-linked debt offers greater flexibility by tying the cost of capital to the borrower’s ability to meet predefined sustainability targets, such as carbon emission reductions or biodiversity gains. This structure incentivises businesses to integrate sustainability into their operations rather than simply raising funds for specific projects.

Jordan Griffiths argued that sustainability-linked debt better reflects the broader transition journey many companies are navigating: “Sustainability-linked debt focuses on outcomes. It allows companies to set measurable goals and hold themselves accountable over time. For insurers, this provides clearer evidence of impact while supporting the wider decarbonisation of entire businesses.”

While green bonds remain attractive to insurers due to their alignment with fixed-income portfolios and regulatory frameworks, Griffiths suggested that sustainability-linked instruments provide an opportunity for greater engagement: “It’s not just about where the money is going, but how companies use it to transition. Insurers can use their influence as lenders to ensure targets are ambitious and credible.”

However, challenges remain. Some attendees pointed to the risks of “target washing” in sustainability-linked debt, where companies set easily achievable targets to access more favourable financing terms. The green bonds that we looked at so far haven’t really moved the dial, warned Linda Zuberi. She stressed the need for rigorous oversight and credible sustainability frameworks to address this issue: “If targets aren’t ambitious or independently verified, sustainability-linked debt loses its impact. Insurers need to engage closely with borrowers to maintain integrity and ensure progress.”

Meanwhile Rob Price highlighted the complementary nature of the two instruments. Green bonds, he argued, are ideal for projects with clearly defined environmental impacts, such as renewable infrastructure or energy efficiency upgrades. Sustainability-linked debt, on the other hand, suits companies undergoing broader operational transitions: “Both tools have their place. It’s about choosing the right instrument for the right purpose – green bonds for project-specific finance and sustainability-linked debt for driving systemic change.”

Mark Burrows, managing director at Quinbrook, highlighted Quinbrook’s flagship renewable energy initiatives, particularly large-scale solar farms, wind projects, and battery storage solutions. He pointed to their collaboration with lending institutions as a key example of integrating biodiversity into renewable energy projects, explaining how solar farm developments are designed to deliver biodiversity net gains through habitat creation and pollinator-friendly landscapes. Burrows noted: “Integrating biodiversity net gains isn’t just a moral imperative; it can be a commercial one. These enhancements can attract premium buyers and build trust, demonstrating that sustainability and profitability can go hand in hand.”

He also stressed the importance of going beyond traditional renewable energy objectives: “At Quinbrook, we believe in creating projects that deliver more than just clean energy. By addressing biodiversity and social benefits, we’re shaping a future where infrastructure works in harmony with nature.”

Rosalind Smith-Maxwell, a director at Quinbrook, discussed the company’s focus on grid stability solutions to address the challenges of transitioning to renewables. She highlighted Quinbrook’s investment in synchronous condensers, describing them as essential for maintaining a secure and resilient energy system: “As we add more intermittent renewables to the grid, stabilising infrastructure becomes a critical priority. Synchronous condensers are a game-changer in ensuring the reliability of our energy supply.”

Smith-Maxwell also addressed the financial requirements to achieve the UK’s Clean Power 2030 target, which demands £40 billion in annual investment. She praised the UK’s progress in cutting emissions by 47% since 1990 but cautioned that scaling investment is vital to maintain momentum. “The transition to net zero requires not only technological innovation but also bold financial strategies. Blended finance and de-risking mechanisms are key to unlocking the capital we need to make this a reality.”

Both Burrows and Smith-Maxwell emphasised collaboration as a cornerstone of Quinbrook’s approach. Burrows concluded: “Achieving net zero is not a solitary effort. It requires partnerships across industries, governments, and communities. At Quinbrook, we are committed to being a catalyst for change.”

She explained that the fund’s strategy focuses on early-stage companies in the UK that are developing game-changing solutions to reduce emissions across sectors such as energy storage, grid flexibility, energy efficiency, and sustainable transport. “We’re targeting technologies with the potential to deliver significant carbon reductions – innovations that are often too risky or untested for institutional investors,” McClintock said.

She elaborated on the fund’s track record, noting that it has supported companies working on solutions that could collectively save an estimated 50 million tonnes of CO₂ annually. Examples include cutting-edge flexibility trading systems that increase grid resilience and innovative heating technologies designed to reduce emissions in hard-to-decarbonise sectors like housing.

McClintock also stressed the urgency of accelerating the transition from prototype to commercial deployment. “The next decade is pivotal for climate action. Without a willingness to back early-stage ventures, we risk stalling progress on the technologies that will underpin the net zero economy,” she warned. She pointed to the need for investors to adopt a more forward-looking approach, recognising the broader environmental and societal benefits of their capital.

The Clean Growth Fund, she explained, works closely with its portfolio companies to de-risk projects and help them scale by providing both financial and strategic support. This includes fostering connections with public-sector organisations and private investors to create the ecosystems needed for these businesses to thrive. “We’re not just funding innovation; we’re helping to build the infrastructure around these companies to ensure they succeed,” she said.

McClintock concluded with a call for more collaboration between venture capital, government, and institutional investors to catalyse the scale-up of transformative technologies. “To achieve net zero, we need an ecosystem that encourages innovation, takes calculated risks, and aligns financial returns with environmental impact. Venture capital has a unique role to play in that equation.”

He explained that innovative and high-risk ventures, such as advanced energy storage, hydrogen production, and next-generation renewable infrastructure, are critical to the UK’s decarbonisation efforts but often struggle to secure private investment due to their untested nature and uncertain returns.

Penketh revealed that, despite there being a general perception that the UK’s National Wealth Fund could readily de-risk these projects , the reality is more complex. Despite the fund’s strategic objectives to act as a catalyst for private sector investment by providing backing for these pioneering ventures, it has indicated that its mandate may constrain it from shouldering risk if the potential exposure is difficult to quantify. He suggested that this may explain why there has not been more investment to date. He expressed concern that this uncertainty could leave a critical funding gap for early-stage projects, delaying progress toward the UK’s net zero targets.

He noted examples where government-backed guarantees could be used to mobilise private capital for sectors like electric vehicle infrastructure; but there would likely need to be a clearer understanding between government and the National Wealth Fund on mandate and policy priorities if that was to move to implementation.

Penketh stressed that without the support of the National Wealth Fund, it will be difficult to unlock the estimated £100 billion in private capital requested from the UK’s insurance and pension sector to meet the UK’s green transition goals. He called for a better coordinated policy framework to empower the fund to act decisively, enabling it to bridge the gap between public and private financing for high-risk, high-reward projects essential to achieving net zero.