The UK’s growing net zero economy could present interesting opportunities for ESG investors. Read on to find out more about what net zero means and how businesses are embracing it.
“Net zero” refers to balancing the greenhouse gases emitted into the atmosphere with the amount removed from it. So, a business that has achieved net zero isn’t adding to the total amount of greenhouse gases.
The UK has committed to achieving net zero by 2050, and many businesses have made commitments too. They might do this by making operations more energy-efficient to reduce emissions, switching to renewable sources of energy, or investing in a project to restore ecosystems.
According to a February 2025 report from the Confederation of British Industry (CBI), the net zero economy grew by 10.1% between 2023 and 2024. The sector generated £83.1 billion in gross value added, with £28.8 billion coming directly from net zero businesses, and the remainder from supply chain activities and broader economic contributions.
So, why could net zero be interesting for ESG investors?
Net zero businesses may align with your ESG values
As ESG investors consider environmental, social, and governance issues alongside financial ones when deciding to invest, it’s easy to see why net zero might be attractive.
Businesses that are net zero have reduced their contribution to climate change and the effect they’re having on the environment. As a result, investors who want to play a role in solving the climate change challenge could find businesses at the forefront of net zero interesting.
Reducing emissions may also align with ESG goals in other ways.
For example, a business that has reduced its emissions has cut its contribution to air pollution and the associated respiratory illnesses, which could support the social goals of an ESG investor.
Net zero businesses could deliver long-term returns
Of course, investment returns cannot be guaranteed, but with the UK’s 2050 net zero goal drawing closer, businesses that embrace it could find they’re in a better position than competitors in the future.
For instance, the government could introduce carbon taxes or emissions caps to encourage businesses to support the 2050 commitment. The firms that have already embedded net zero in their business could benefit and claim a competitive advantage.
It’s impossible to know what’s around the corner. Yet, establishing net zero practices now could mitigate business risks.
The CBI report noted that private investment has played a significant role in the growth of the sector. Private investors have invested around £25.9 billion in the net zero economy since 2005, with a large majority of this investment coming in since 2019.
As an ESG investor, net zero businesses could provide a way to balance your values and financial goals. Your investment could have a positive effect while delivering returns.
Incorporating net zero investments into your portfolio
While net zero investment opportunities may sound exciting, don’t dive right in. Even if an investment matches your ESG values, it’s important to ensure that it aligns with your wider financial plan.
One challenge of investing in net zero businesses is that your options will be more limited than if you were investing in the wider market. The CBI report suggests that 22,800 companies in the UK are net zero, but only 6% of them are large employers.
All investments carry some risk, so you may need to balance the potential returns against the risk to understand whether it’s suitable for you. In addition, you may also consider your investment time frame, long-term goals, and the diversification of your overall portfolio. Taking these steps before investing could help you identify appropriate opportunities, and it’s something your financial planner could help with.
Contact us to talk about your investment goals
If you’d like to update your investment strategy or discuss how you might incorporate ESG values, please get in touch.
Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.
The value of your investments (and any income from them) can go down as well as up, and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
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