Last week’s gathering of the EMDE Investor Taskforce at Lambeth Palace marked more than the launch of a report. It marked a moment of alignment across the financial sector and government around a shared recognition: if the world is to meet sustainable development objectives, including climate finance targets agreed at UNFCCC, the UK has both the responsibility and the strategic incentive to play a central role.
The event also marked the formal launch of the Taskforce’s new report ‘Baku to Belém and Beyond: Strengthening the UK Investment Landscape to Support Climate Transition in EMDEs’. Earlier in the afternoon, members of the CEO-Ministerial Leadership Group met to examine the report’s findings and discuss the road ahead, before the reception opened out to the wider stakeholder community of pension funds, insurers, asset managers, MDBs and DFIs, and senior government representatives. It was a gathering that itself illustrated the cross-sector coalition the Taskforce has worked to build.
Ministerial addresses from Baroness Chapman, Minister for International Development, and Lucy Rigby, Economic Secretary to the Treasury, set the tone: this is not merely an industry conversation. It is a matter of national strategic interest.
“This report shows that a small nudge in allocations could unlock meaningful transition finance, whether by tilting existing allocations to become more transition focused or through additional allocation, diversifying portfolios,” said host and Church of England Pension Board Executive, John Ball.
“UK Asset Owners are uniquely positioned to make a positive contribution to this agenda with our strong financial markets, sustainable finance expertise and research capability, and with the strong leadership shown by the UK Government in establishing this Taskforce, which is already showing the power of collaboration across investors and government, and focused on practical solutions,” Ball explained.
Why this Report, and Why Now
The report lands at a pivotal moment. The Baku to Belém Roadmap, launched ahead of UNFCCC COP 30 by the Brazilian presidency, has set out the scale of the climate finance challenge with unusual clarity: emerging markets and developing economies (EMDEs) will need $1.3 trillion annually in external climate finance by 2035 to deliver clean energy, resilience infrastructure, and nature-based solutions. Private capital must play a central role in closing that gap, and institutional capital has been identified as a particular need.
Yet the data in our report reveal a striking mismatch between the scale of that need and current UK allocation behaviour. UK pension funds and insurers, collectively managing £6.2 trillion in long-term assets, allocate just 4.2% of their portfolios to EMDEs. Private market exposure, where the most significant climate opportunities are concentrated, stands at a mere 0.2%.
As the report makes plain, this is not only a story of risk appetite. It is a story of structural inertia: governance frameworks calibrated for a different era, fee caps that disadvantage complex mandates, inconsistent policy signals, and an apparent shortage of investable, appropriately structured products.
The Business Case
The modelling at the heart of the report is striking precisely because of what it shows is achievable through modest, realistic adjustment rather than wholesale portfolio transformation.
Raising current EMDE private market allocations from 0.2% to 2%, a level that approximates the highest allocation already observed among the UK asset owners interviewed for the report, would grow the stock of capital deployed from £2 billion to £23 billion.
These are not aspirational projections premised on behavioural revolution. Rather, it is the kind of shift that long-term investors can and do make when the policy environment, product availability, and institutional incentives are properly aligned.
Hendrik du Toit, Founder and Chief Executive of Ninety One, captured the point at last week’s reception: in the current environment, the need for diversification is making EMDE investment an increasingly attractive opportunity. What is required is for government and industry to address the remaining friction points that are inhibiting the flow of capital.
Call to Action
The report’s recommendations are addressed across the full investment value chain. They are not directed at any single actor, because the barriers are systemic and require a systemic response.
- For the UK Government: the primary ask is clarity. UK asset owners operate in a policy that inadvertently positions the domestic productive finance agenda and EMDE investment as competing priories. They are not. With pensions contributions rising and assets under management and administration growing, there is ample opportunity for both. The Government can and should signal that EMDE climate investment is consistent with, and in fact mutually reinforcing, its broader financial services and growth ambitions at home. Beyond messaging, the report calls on Government to dedicate resource to convening MDBs, DFIs, philanthropy, and the investment industry to develop innovative financial structures, and to consider where backing structures can be used to de-risk investments at a market-shaping scale.
- For asset owners: the report’s asks are practical and sequenced. The starting point is straightforward: trustees should establish what they actually hold in EMDEs today, including any climate or sustainability-oriented assets, and officers should engage with their investment consultants on whether that allocation should increase. From there, the report encourages asset owners to explore both existing and new routes into EMDE climate investment, including sustainability-linked and green sovereign bonds, and new private markets allocations in infrastructure and private credit. Critically, the report also calls on asset owners to deepen their partnerships with MDBs, DFIs and the broader impact sector, participating actively in forums designed to bring these parties together.
- For multilateral development banks and development finance institutions: the report asks for investment vehicles calibrated to the regulatory realities of UK institutional investors. Standardised performance data, expanded guarantee mechanisms, and meaningful liquidity provisions are all highlighted as needs.
- For asset managers: the commercial opportunity is clear. The report calls on managers to develop investment strategies with risk-reward propositions that genuinely work for pension funds and insurers, including by securing concessional finance or first-loss guarantees from MDBs, DFIs, or philanthropy, and by building in credible exit strategies that address liquidity concerns. Managers are also asked to build internal capacity in EMDE climate finance and to support greater disclosure and standardisation of performance data across EMDE private markets.
- For investment consultants: As the catalysts who shape client portfolios through model allocations and manager research, consultants have an outsized ability to either accelerate or constrain capital flows to EMDE climate solutions. The report calls on them to update model portfolios to reflect EMDE climate opportunities, to evaluate a wider range of EMDE strategies and managers, and to integrate forward-looking climate scenarios into the capital market assumptions they provide to clients. Commitments to EMDE capacity-building in-house, including participation in Taskforce workstreams, are also explicitly requested.
A failed global transition will impose systemic risks on UK portfolios from which no amount of domestic diversification can provide shelter. Investing in EMDE transition and resilience is, in this framing, a form of portfolio self-protection as much as it is an act of shared global responsibility.
To support the delivery of these recommendations, the EMDE Taskforce has is working through five workstreams focused on developing practical, implementable solutions across the investment ecosystem. These workstreams will bring together Government, asset owners, managers, consultants, and development finance institutions to co‑design the tools, structures, and market infrastructure necessary to unlock EMDE climate investments at scale.
The UK’s Moment
The backdrop to last week’s event is significant. Following COP30 in Brazil, attention is turning to whether investors are engaging with the recommendations set out in the Baku to Belem Roadmap. This report sets out a path to ensure the Roadmap does not become another ambitious climate finance policy signal that struggles to find traction with private investors.
The UK has an opportunity – and, the report argues, a strategic interest – to lead. The City of London’s position as a global centre for sustainable finance is not self-sustaining. It depends on the UK’s ability to demonstrate that it can actually move capital, not merely articulate the case for doing so.
The work of the Taskforce Leadership Group, and the conversations that took place at last week’s reception, represent a serious attempt to translate that case into action. The report provides the analytical foundation. The task now is implementation.
