Universities that fail to do enough to reduce their impact on the environment will face financial penalties, the Government has said.

The move, announced by John Denham, the Universities Secretary, comes as a strategic review of sustainable development in higher education identifies concerns about the sector's progress on the issue.

In his annual grant letter to the Higher Education Funding Council for England, Mr Denham said: "Over the next spending review, all institutions in receipt of capital funding should have plans to reduce carbon emissions, and performance against these plans should be a factor in future capital allocations."

As Times Higher Education went to press, Hefce had given no details about how this directive would be interpreted.

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But in a review of sustainable development published this week, the council warns that activity in the sector is "very disparate".

"Some (institutions) engage in multiple, co-ordinated institution-wide sustainable development activities involving hundreds of staff, some have only a few active individuals, and some no identified activities at all," the report says.

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"Moreover, different institutions have different perceptions of what sustainable development is and how it should be appropriately pursued - if at all - within the institution."

The lack of consensus on sustainable development hinders universities' efforts to identify and co-ordinate activities, it warns, and institutions can be too reliant on a few individuals to take the initiative.

It says: "A major challenge is the institutionalisation of this initiative, so it ceases to be wholly dependent on the initiators - who may move on - and so that connections can be made across the institution."

The report splits its analysis into three key areas, sustainable development in research, teaching and estates and management.

Research

Although research into sustainable development is being carried out at more than two thirds of England's 132 higher education institutions, activity differs drastically in scale, from single individuals to hundreds of researchers across institutions.

A key factor, the report suggests, is the extent to which universities co-ordinate and encourage such research. But the availability of funding is also highly significant.

It cautions: "Sustainable development research will not increase further without a further increase in funds ... It is not clear that the research councils are currently committed to such an increase."

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The study notes surprisingly few submissions of sustainable development research to the last research assessment exercise, in 2001, which it attributed, in part, to the RAE process itself. Suggesting that the disciplinary organisation of the RAE panels and the perceived low status of journals in which sustainable development research tends to be published, it recommended that Hefce seek new ways of assessing multidisciplinary research.

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Teaching

Sustainable development is treated inconsistently in the undergraduate curriculum, the report finds, with some universities, departments and academics giving it "low priority or no priority at all".

Acknowledging "serious challenges", the report says: "There is some evidence that the words 'sustainable development' in course titles don't recruit well. This may tell us something about what employers want, or are perceived to want, and so about the skills agenda, too."

But it warns against forcing change via regulation. "Institutions are likely to adopt something ... because they want to do it, rather than because they are required to do it."

Estates and management

The report highlights an apparent apathy among universities. Of the 132 institutions asked to take part in the survey, only 22 responded.

The report warns that conclusions based on such a small sample must be treated with caution. It identified evidence that sustainable transport was being promoted, but that there was less "appetite" for reducing parking space to cut car use.

Although some institutions treat sustainable development issues "very seriously", more comprehensive data is required to draw broader conclusions, the report says.

- A new fund will make money available to universities for projects to reduce greenhouse gas emissions.

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The repayable loans will be provided by Hefce and Salix Finance, which expect to distribute up to ?40 million over three years. A small-projects fund will give institutions the money to set up a ring-fenced fund for initiatives, while a transformational fund will aid larger, innovative projects.

john.gill@tsleducation.com