To tackle climate change, we need a significant increase in public and private capital investment.

The UK government estimates this figure to be £50–60 billion a year, up from around £10 billion in 2020. Effective partnership between the public and private sector is crucial to achieve this sixfold increase.

Industrial strategy will need to play a central role. But underneath an economy wide strategy, different sectors, whether that’s hydrogen or home heating, face different barriers to scaling. Until these sectors generate a return comparable to non-green investment, private capital is unlikely to flow at pace.

The UK has experience in using industrial policy to deliver public goods alongside investible products. The success of the offshore wind sector in the UK was supported by the public Green Investment Bank, strategic policy interventions and an ongoing dialogue between practitioners and policymakers. In a time of high interest rates, there is an increased focus on how targeted public finance can be best used to mobilise private investment for the transition. Future industrial policies will need to integrate and catalyse private finance in a similar way.

Our research in this report looks at what is currently holding investors back and provides recommendations as to how this partnership could work in practice, alongside an industrial strategy.