Long ReadApr 19 2023

Will ESG investment managers follow the govt in backing nuclear?

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Will ESG investment managers follow the govt in backing nuclear?
Sizewell A and Sizewell B nuclear power stations in Suffolk, UK. (Andrew Oxley/Dreamstime.com)

Wind turbines and solar panels are commonly associated with low-carbon energy, but nuclear power is also being considered in the pursuit of net zero.

In a move to encourage private sector investment, chancellor Jeremy Hunt said in the spring Budget that the UK green taxonomy will class nuclear power as ‘environmentally sustainable’, subject to consultation.

Although nuclear fuels are not renewable, the classification would enable nuclear power to have the same investment incentives as renewable energy.

But despite being low-carbon, it is not uncommon to come across ESG funds and investment companies that exclude nuclear power generation. So will investment managers follow the UK government’s approach to nuclear power?


William Argent, lead adviser to the VT Gravis Clean Energy Income Fund, says the fund’s responsible investment statement does not currently allow exposure to nuclear power generation assets.

“There may be some very modest exposure to companies involved in the nuclear energy supply chain, providing services; but we do not have exposure to companies that own nuclear energy generation plants themselves,” he adds.

While the UK government wants to class nuclear power as ‘environmentally sustainable’, Argent says his position on nuclear energy has, at this stage, not changed. “We exclude it as a commonly perceived ‘controversial activity’.

“There would need to be a shift in that perception among our investors and more widely. We would not consider changing the stance unless there was a broader acceptance.”

Other funds avoiding companies that generate revenue from nuclear power generation include Quilter Cheviot’s Climate Assets Funds.

“While we recognise that nuclear power does not generate greenhouse gas emissions, and therefore it has a role to play in the net-zero pathway and transition away from fossil fuels, we do not consider it a ‘sustainable investment’,” says Claudia Quiroz, lead fund manager of the Climate Assets Funds, and head of sustainable investment at Quilter Cheviot.


Citing environmental and safety issues that “outweigh” zero emission credentials, she says: “Nuclear energy generates a significant mass of radioactive waste. In addition, however it is disposed of, that radioactive waste will remain for generations to come.

“Safety concerns, both accidental and deliberate, also exist. While the operation of nuclear power plants is undoubtedly safer than previous generations and an accidental disaster on the scale of Chernobyl is unlikely, safety challenges do remain. 

“Nuclear power plants are also easy targets for malevolent acts such as terrorist threats, cyberattacks or acts of war.”

Although Quiroz describes the UK government’s intended sustainable classification of nuclear energy as ultimately a positive move, she adds that as sustainable investors, it will not change the fund’s philosophy on investing in nuclear energy.

“There are still too many questions in our mind when assessing how to dispose of hazardous materials, water contamination and safety issues. There are environmental concerns about the disposal of nuclear waste and the impact this has on both human health and biodiversity,” she says.

“As previous events have shown, there are also wider safety implications for people working and living in or near nuclear power plants. There is work to be done, therefore, to improve these elements of nuclear power generation and a long way to go before we can consider it a sustainable industry.

“We recognise that the level of investment and research that will go into nuclear power will help solve some of these issues, but given progress to date this will take a considerable amount of time and resource.”

Richard Lum, co-chief investment officer at Victory Hill Capital Partners, which advises VH Global Sustainable Energy Opportunities plc, expresses less support. 

He argues it is “imperative that the government should move away from [nuclear] technology if it is serious about decarbonising”, citing carbon emissions that occur during the extraction and disposal of the fuel source for nuclear energy and in the materials used in the construction of plants.


Like Argent and Quiroz, Lum says Victory Hill’s position on nuclear energy has not changed, and disagrees with it being ‘environmentally sustainable’.

“Fundamentally, nuclear is not environmentally sustainable given, at the very least, the waste from nuclear power stations is highly toxic and needs a permanent form of containment, which prevents any potential forms of leakage into the biosphere,” he says.

“On this basis alone, it is difficult to characterise nuclear power as environmentally sustainable.”

Globally, nuclear projects have also tended to overrun in cost and time, according to a report by the Parliamentary Office of Science and Technology (Post). Developers suggest new designs could address historical issues, the report states, but these will require further development and not be available until at least the next decade.

Jon Wallace, manager of Jupiter Green Investment Trust, which counts clean energy as an investment theme, likewise distinguishes between ‘old’ and ‘new’ nuclear energy.

Although the classification of nuclear energy as environmentally sustainable is not yet confirmed, Wallace says: “We don’t see this move changing the bigger picture for the ‘old’ nuclear sector – plagued by delays, cost overruns and without a long-term waste solution.

“However, support is growing in the UK and US for ‘new’ nuclear energy, which includes small modular reactors and fusion with the potential to overcome these issues.”

But in its report, Post cites the 2030s as the indicative timeframe for commercial deployment of small modular reactors; while fusion, an alternative form of nuclear energy, is unlikely to contribute to emission reduction targets before 2050 at the earliest.

Indeed, Wallace adds: “While the debate will continue on whether nuclear is, or can ever be, environmentally sustainable, our take is to focus on the parts of the energy ecosystem such as grid infrastructure, and certain elements within renewables where the combinations of policy and technology risks make a more attractive investment.”

As some investment managers currently maintain their positions on nuclear energy, others also indicate that their stance could be subject to change.

Until the majority of our clients change their view of nuclear, then the exclusion will remain.Aegon AM

Aegon’s ethical funds, for example, do not invest in companies that provide critical services to, or own or operate, nuclear facilities. “Our ethical fund range has client-led exclusions, and until the majority of our clients change their view of nuclear, then the exclusion will remain,” a spokesperson says. “We ask their opinions on the exclusions every two years.”

Similarly at Aviva Investors, a spokesperson says: “There is an ongoing debate on nuclear of which we are part, looking at the implications of supply of energy, build costs and nuclear waste.

“We are not actively involved in direct investment in nuclear energy at the current time, but will continue to look at both the sustainability and economic considerations of future investment in this area.”

Chloe Cheung is a senior features writer at FTAdviser