The Alternative Investment Management Association (AIMA) is lobbying the UK government to exempt hedge funds from upcoming climate disclosure rules that would require firms to publish detailed transition plans toward net zero, according to a report by Bloomberg.
The move follows a successful campaign in the European Union earlier this year, where hedge funds secured an exemption from similar requirements.
AIMA, which represents firms including Bridgewater Associates, Millennium Management and Man Group, argues that the proposed UK rules are ill-suited to hedge funds’ short-term investment strategies.
“If a fund’s investment horizon is relatively near term, then it might not be meaningful to have a plan that goes out to 2050,” said Adam Jacobs-Dean, AIMA’s global head of markets. Many hedge funds, he added, trade instruments such as interest-rate derivatives with little direct link to the real economy.
The UK’s push to tighten climate oversight comes after a 2024 court ruling that found its existing policies inadequate to meet net-zero commitments. The government is now drafting a wider sustainable finance package, which will include the transition-plan requirements for all regulated money managers, banks, insurers and pension funds — including subsidiaries of foreign firms. Energy Secretary Ed Miliband has described the plans as “crucial” to managing both climate risks and investment opportunities.
Investor groups such as the Institutional Investors Group on Climate Change, representing about $75tn in assets, have urged a phased rollout of the rules, beginning with the largest companies and allowing flexibility for smaller ones.
In the EU, hedge funds are expected to remain exempt from the Corporate Sustainability Reporting Directive after AIMA argued that the framework would impose excessive administrative burdens and duplicate existing disclosures. Final adjustments to Europe’s ESG regime are expected early next year.
Jacobs-Dean said AIMA is “not opposed” to using finance to support the energy transition but stressed that rules must be “effective and proportionate.” He noted that while hedge funds already assess climate risks to satisfy investor expectations, most of the countries in which they invest lack comparable disclosure standards, complicating the creation of meaningful transition plans.
The debate comes amid broader global tensions over the reach of ESG regulation. The US Securities and Exchange Commission has voiced concern over the EU’s so-called extraterritorial rules, which require non-European firms to meet its standards when accessing EU markets. Analysts expect similar objections from Washington once the UK finalises its proposals.
In Britain, opposition to green policies is being led by Nigel Farage’s Reform party, while major financial trade bodies such as UK Finance are urging the government to allow firms to set their own climate targets. Legal experts warn that mandatory transition plans could expose firms to new liabilities and higher costs.
