Britain’s pensions industry could invest up to 1.2 trillion pounds ($1.5 trillion), half the capital needed by 2035 to put the UK on track to its net-zero goals, if there were more attractive projects and fewer regulatory barriers, a report on Tuesday showed.

The UK pensions industry currently invests 4% of its assets in “climate solutions” and is on course to invest just 300 billion pounds by 2035, according to research from British life insurer Phoenix Group and campaign group Make My Money Matter.

Too few of the opportunities, which Phoenix said include projects, such as wind and solar power and energy-efficient housing, are scalable and offer appealing returns, the report found.

Regulatory constraints on the UK pension industry are also limiting financing of longer-term illiquid investments, it said.

“We’ve got these big aspirations, as have our peers, of investing in climate solutions and we’ve got some real challenges,” Bruno Gardner, Head of Climate Change and Nature at Phoenix, told Reuters.

“One of the fundamental reasons is even when opportunities come down the pipeline, they are not investible … in a way that delivers strong returns,” he said.

The report identified seven actions policymakers and regulators could take to unlock investment, several of which Gardner said could be achieved within 12 months.

The government should publish an economy-wide national transition plan and provide better long-term policy certainty and incentives to investors, including by improving the planning and permitting regime to prioritise climate-beneficial infrastructure, the report said.

Regulators need to provide pension funds with clarity on considering climate impacts as part of their fiduciary duties.

British pension funds have 3.7 trillion pounds in assets but much is held in low-risk government bonds. The government has unveiled plans to encourage funds to invest more in infrastructure and startups, to boost economic growth.

Tony Burdon, CEO of Make My Money Matter, said there was strong demand among individual pension savers to invest in ways that lower carbon emissions, especially given that climate change “will undermine pension returns in future”.

However, he said smaller UK schemes – Britain has more than 5,000 defined benefit schemes alone – and their trustees lack the expertise to assess climate-related risks and invest accordingly. The lack of regulatory guidance “leads to extreme caution” among funds, he added.

Pension funds globally see opportunities from a transition to a lower-carbon economy. California’s top public pension system on Friday said it would more than double its climate-focused investments to $100 billion by 2030.

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