ESG: the cost of a hotter UK

• Canada invests in clean energy development – over $50bn of clean energy projects are to be built in Canada, supported by over $10bn in direct federal funding. The money will go towards hydroelectric and wind energy installations deigned to support the country’s renewable goals and help build out the capacity of its electricity grid.
  
  
• Lloyds expands sustainable financing ambitions – Lloyds Banking Group has launched a new target to facilitate more than £100 billion of sustainable and transition finance between 2027 and 2030. The commitment broadens support for sectors facing significant decarbonisation challenges. This builds on the £70bn of sustainable finance provided between 2022 and 2025.
  
  
• CATL strengthens supply chain decarbonisation – Chinese energy tech company CATL announced that all 20 of its battery plants are now carbon neutral. The company unveiled a roadmap to achieve carbon neutrality across its entire value chain by 2035. This includes guidelines that will require suppliers to disclose carbon footprint data and reward stronger low-carbon performance.
  
  
• Northern Trust loses endowment mandate – Northern Trust Asset Management has lost an investment mandate with social charity Nesta, after the manager exited a number of climate alliances, including the Net Zero Asset Managers initiative and Climate Action 100+. The mandate has since been reinvested with Amundi.

Cracks are starting to show

Recent heatwaves have highlighted a growing challenge for UK homeowners. Prolonged periods of hot, dry weather are causing the clay-rich soils underlying much of London to dry out, leading to a sharp increase in subsidence, a phenomenon where shrinking ground destabilises building foundations. The result can be costly. Homeowners have reported significant structural damage, including large cracks in walls, sticking doors and shifting foundations. In the four years to 2025, insurance payouts for subsidence damage rose 90%.

Subsidence is becoming an increasingly important risk as our climate changes. Hotter, drier summers can cause the ground to shrink, increasing the likelihood of damage to homes and buildings. The impact reaches beyond homeowners too, affecting insurers, lenders and local infrastructure. With repair costs and insurance claims continuing to rise, it's another example of how extreme weather is creating real financial challenges across the UK.

As extreme weather becomes more common, understanding the wider financial implications is increasingly important. Explore our insight on how droughts and heatwaves could investors.

This article is for financial professionals only. Any information contained within is of a general nature and should not be construed as a form of personal recommendation or financial advice. Nor is the information to be considered an offer or solicitation to deal in any financial instrument or to engage in any investment service or activity.

Parmenion accepts no duty of care or liability for loss arising from any person acting, or refraining from acting, as a result of any information contained within this article. All investment carries risk. The value of investments, and the income from them, can go down as well as up and investors may get back less than they put in. Past performance is not a reliable indicator of future returns.