Financing the Transition: Insights from the Latest Journey to Net-Zero Roundtable
This blog, authored by Scottish Financial Enterprise Young Professional's Climate Change & Journey to Net-Zero Workstream, reflects on a recent roundtable discussion with professional and financial services members of SFE on the topic of financing the transition. We extend our sincere thanks to Shepherd & Wedderburn for generously hosting the session and to all roundtable members for their contributions.
The discussion explored three core themes:
Risks to the UK’s renewable energy capacity
Metrics Matter
Barriers and enablers in financing the transition
Risks to the UK’s Renewable Energy Capacity
The discussion covered some of the key challenges facing energy capacity. The UK Government’s Clean Power 2030 targets are ambitious, and progress so far has been slower than anticipated. Combined with a marked slowdown in Oil & Gas activity, this raises concerns about a just transition and the resilience of the UK’s energy supply chain. Renewable projects are not advancing at pace, and roundtable members discussed that supply-chain firms are increasingly looking overseas for greater certainty and faster delivery. This poses a significant risk to a Just Transition.
One participant highlighted a case study as a blueprint of a Just Transition. This case study comes from Collie, a coal-dependent town in Western Australia that began its transition from coal in 2017. Rather than vilifying coal, the government implemented a structured five-year roadmap for decommissioning, anchored in community engagement and economic diversification. Key measures included establishing a Jobs and Skills Centre to provide tailored retraining, creating a dedicated Just Transition Unit for cross-government coordination, and investing in new industries to sustain employment. Collie’s experience demonstrates that transparent planning, community engagement, and proactive support can transform high-emission regions into resilient, future-ready communities.
In terms of renewable capacity, some contributors stressed that large-scale, gigawatt-level projects should be prioritised over numerous smaller developments, as these create clearer demand signals for supply chains and attract investment. Investment in storage capacity was also noted as critical over the next 15 years to balance variable renewables. Interestingly, one member noted that hard-to-abate sectors, such as shipping, may become less challenging to resolve if renewable capacity expands significantly over the next decade, given the volume of fossil fuels transported by cargo today. That is, we should focus on expanding capacity and the harder-to-abate will become easier to tackle.
Beyond centralised capacity, there was recognition of the need for decentralised energy systems to enhance resilience amid increasing physical climate risks. However, the current economic model misaligns costs and benefits: private actors bear the costs, while societal benefits—such as community resilience—are widely shared. One member called for frameworks that better reward the public value of decentralised investments.
Finally, participants emphasised the importance of depoliticising net-zero. One member cited early COVID-19 communications as a model: consistent, expert-led, and fact-based. However, unlike COVID, climate change lacks a quick feedback loop—there is no daily dashboard for installed capacity as there was for the COVID R value. Some suggested the UK could learn from Japan’s approach, which leads with the economic benefits—jobs and economic growth—of renewable energy, not cutting emissions.
Metrics Matter
Views on climate reporting were mixed. One member described their firm's advanced approach, including granular modelling of energy use—which includes homeworking versus office—and analysis of commuting emissions using employee surveys and postcode analysis. Others warned of over-reporting risks, noting that frameworks such as Taskforce on Climate-Related Financial Disclosures (TCFD) have drifted from strategic catalysts to tick box exercises.
Overall, it was broadly agreed that focus needs to be shifted away from reporting on carbon reduction, and one member’s input particularly struck us: “You don’t measure the performance of a car based on its fumes.” In other words, metrics should prioritise investment into installed gigawatts, storage capacity, etc. —not solely carbon emissions. While emissions matter, capacity drives the transition.
Barriers and Enablers in Financing the Transition
Banks face challenges in addressing financed emissions, particularly those linked to downstream investments (Category 15). Decarbonising these portfolios is where real-world impact occurs—beyond making the financial sector appear “tidy.”
However, interest in green funds has waned following underperformance, and many renewable investments currently offer lower returns than traditional assets. Improved investor appetite for green funds will depend on risk mitigation and enhanced returns through blended finance or policy support. One member noted that pension funds represent a significant pool of capital for the transition, but unlocking this requires robust policy frameworks to underpin investment strategies.
One provocation resonated strongly: investors have long prioritised Return on Investment (ROI) where income is prioritised; perhaps they should also embrace Return on Intention. During COP26, government representatives acknowledged that a narrow ROI focus overlooks resilience and long-term sustainability. Another member noted that Banks should lead candidly - acknowledging when hurdle rates cannot be met and explaining why resilience and sustainability justify the investment. Participants also highlighted the power of narrative: share prices reflect beliefs, and framing resilience as a value proposition matters.
Under the Trusts and Succession (Scotland) Act 2024, which came into effect in November 2024, certain trustees in Scotland are now explicitly permitted to take Environmental, Social, and Governance (ESG) factors into account when making investment decisions—provided these decisions remain consistent with their fiduciary duty to act in the best financial interests of beneficiaries. One member expressed that investments should be made in the best interest of the clients’ future in the real world, not just the best interest of their portfolio’s return.
Summary and Conclusions
The roundtable underscored several critical insights into the UK’s transition to net-zero progress, including the barriers in our way and how to overcome them.
Capacity Risks: Progress toward renewable energy targets is lagging, and there is significant risk that we lose capacity abroad.
Depoliticise the Transition: Clear, consistent messaging focused on economic benefits rather than climate obligations could help depoliticise the transition.
Metrics Matter: Reporting focus should shift from tick box exercise to more meaningful measures that track contributions to the UK's renewable energy capacity.
Financing Innovation: Unlocking more pension capital and reframing ROI to include resilience and long-term sustainability are some examples that could support investment being deployed more effectively.
For Scotland, the transition presents a unique opportunity to leverage its world-class renewables potential and financial expertise to become a global leader in renewable energy innovation and investment, but the barriers highlighted by roundtable members, if not overcome, could see us lose out to our international competitors.