Zoe Alipranti
Senior Policy Programme Manager
2026 will be an important year for the UK’s climate and sustainable finance agenda, as key policy foundations transition from design to implementation. This insight outlines the key developments expected this year and their implications for investors, with progress anticipated across six core areas of a credible transition.
These six areas are shaped by three overarching themes that define the UK’s approach in 2026. First, the UK is continuing to build a strong institutional framework to support the flow of finance into the green economy. Second, regulators are advancing the rollout of robust disclosure standards to improve the quality, consistency and usefulness of corporate information. Third, climate and industrial policy are becoming more closely integrated, enabling a more strategic approach to real economy decarbonisation.
1. Accelerating real economy decarbonisation
The UK government will prioritise the implementation of its Carbon Budget Growth and Delivery Plan, published in October 2025, to accelerate decarbonisation across key sectors, including transport, buildings, and industry. New investor factsheets – currently under development – are expected to clarify sector priorities, investment opportunities and relevant policy signals for different technologies.
Delivery of Carbon Budgets 5 and 6 will require sustained private investment supported by credible long-term policy signals and appropriate risk-sharing. Blended finance mechanisms will be central to scaling this investment. The National Wealth Fund (NWF) provides a key mechanism for public capital to de-risk and complement private investment.
The NWF published its Strategic Plan in January 2026, outlining how it will deploy capital to unlock long-term growth and accelerate the transition to clean energy. It highlights targeted interventions to de-risk investment in priority sectors and technologies such as energy storage and battery manufacturing. Its focus on clean investments and explicit recognition of how public financial institutions will work with investors is welcome. Early clarity on pipeline development and an increased pace of investment will be important for investor confidence.
2. Scaling low-carbon technologies and clean energy generation
Great British Energy (GBE), launched in May 2025, has begun to outline its role in supporting clean energy generation and infrastructure. As a strategic partner for both developers and investors, GBE can help scale low-carbon technologies. GBE has made some progress in bolstering offshore wind supply chains and public sector solar rollout, working alongside the private sector, but much of this remains at an early deployment stage. Critically, it works alongside the NWF to align public policy objectives with commercially viable investment structures.
Supported by the new UK Industrial Strategy, both these institutions can accelerate investment, and institutional investors are keen to contribute to the success of these blended finance instruments.
3. Sector transition roadmaps to guide capital flows
Work will continue this year on sectoral transition roadmaps, which are emerging as a crucial tool for aligning policy signals with investor needs, particularly for hard-to-abate and high-impact sectors. The Net Zero Council and the Transition Finance Council are helping to identify investment gaps, clarify pathways, and provide greater visibility on delivery risks. Both Councils’ work on the development of pathways also marks progress towards a more integrated approach across real economy and sustainable finance policy.
For investors, these roadmaps can bolster confidence and support more efficient capital allocation – particularly if they are aligned with the investor principles laid out in this paper. Implementation is essential: the roadmaps must lead with solid principles and translate into tangible actions to ensure capital begins flowing into the decarbonisation of key sectors. Clarity on how these plans embed within the wider policy framework – including the Industrial Strategy and Infrastructure Strategy – will be particularly valuable to investors.
4. Embedding the UK sustainable finance framework
A core milestone for 2026 will be the next phase of the UK’s sustainable finance disclosure regime. Government consultations on transition plans and the UK Sustainability Reporting Standards (SRS) concluded last year, and the FCA on 30 January published a consultation on the introduction of UK SRS requirements for listed companies. The government will separately consider and consult on requirements under company law for economically significant companies not covered by the FCA regime. This marks a shift away from TCFD reporting towards UK SRS based on the International Sustainability Standards Board (ISSB) standards.
Investors need transparent, consistent and decision-useful information to understand companies’ exposure to climate-related risks and opportunities. UK SRS will improve disclosure quality and enhance global comparability. It is therefore vital that UK SRS are applied coherently across corporates and financial institutions, with carve-outs avoided to promote interoperability and support effective capital allocation.
We are also supportive of the disclosure of mandatory Transition Plans for high-emitting and hard-to-abate sectors in a phased manner, as they help increase access to high-quality, reliable and comparable data on how companies are transitioning, thereby informing capital allocation and engagement.
5. Setting the Seventh Carbon Budget
2026 will be critical for the long-term planning of the UK’s Seventh Carbon Budget, which must be set by June. The decision – informed by advice from the Climate Change Committee – will determine the emissions trajectory for the early to mid-2030s. Clear policy signals are essential for unlocking investment in infrastructure, low-carbon technologies and supply chains.
A credible, well-defined carbon budget can reduce regulatory risk and provide the certainty needed to guide decisions across asset classes. By providing clarity on emissions trajectories and sectoral priorities, the Seventh Carbon Budget can help investors channel capital into projects and technologies aligned with the UK’s net zero goals, supporting transition planning at both sectoral and national levels.
6. Nature
2026 may finally bring clarity to several stalled domestic and global nature policy areas.
Domestically, Defra has yet to publish the final Land Use Framework (LUF). The LUF was originally intended to guide spatial planning, target Environmental Land Management (ELM) schemes effectively and ensure Biodiversity Net Gain (BNG) aligns with national biodiversity and climate goals. BNG will nonetheless become mandatory for Nationally Significant Infrastructure Projects (NSIPs) from May 2026, likely increasing the demand for biodiversity units and accelerating nature market growth.
Internationally, Defra continues to progress on the UK Forest Risk Commodity Regulation (UKFRC) to provide mandatory due diligence regime for tackling deforestation. However, secondary legislation has been delayed, with no new timeline. While alignment with the European Union Deforestation Regulation (EUDR) is expected given the UK’s stated desire for interoperability, some divergence remains possible.
Navigating the year ahead
Driving a credible, investable transition in 2026 will require consistent policy signals, long-term clarity and effective implementation of the UK’s evolving regulatory framework. Energy affordability will increasingly feature alongside decarbonisation and will shape political and policy choices.
As UK policy and regulations shifts from ideas to delivery, investors will play a critical role in shaping expectations and supporting high-quality, credible transition planning. IIGCC will continue to work with members, policymakers and regulators to strengthen the UK’s sustainable finance framework and ensure it supports a resilient, investable transition.
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