The Green Economy in a new political era
Labour’s landslide victory brings a clear mandate for change as they face widespread social and economic challenges, such as the state of the NHS and the ongoing cost of living crisis. The new Government also inherits the legacy of slow progress on climate action, with the UK currently not on track to reach targets.1
This does leave a huge space for progress. Steven Pyne, Managing Partner of Holden & Partners said, “There’s a buzz of optimism that comes with political change, and a strong indication that there will be long-overdue action for the benefit of the environment.”
It’s also worth noting that the green voice might be amplified by four Green Party MPs and 72 Liberal Democrats, as Labour begins to implement its Change manifesto.
The Change manifesto
Whilst climate change wasn’t a headline grabber throughout the campaign process, the push for clean energy by 2030 was stated as “Labour’s second mission,” in the manifesto, after kickstarting economic growth.2
To achieve this, and other environmental benefits, they pledge to:
- Increase renewables by doubling onshore wind, tripling solar power and quadrupling offshore wind.
- Step back from fossil fuels by not granting new licences for coal or oil fields and banning fracking.
- Create the publicly owned Great British Energy to facilitate the shift to clean power and reduce prices.
- Allow the Bank of England to consider climate change in its mandate (reversing a Conservative policy).
- Support British farmers to allow food to be locally produced, in an environmentally friendly way, thus increasing national food security.
- Act on nature and resources, with investment in new habitats and by meeting legally binding nature recovery targets by 2030.
Perhaps most interesting of all is the easily overlooked statement in the manifesto of “moving to a circular economy.” If substantiated, this could lead to a radical rethink of the waste and resource management.
Steven Pyne commented, “As with all these topline statements, the devil is in the detail. It will also be interesting to see the extent to which green issues are embedded in all policy. For example, the house-building pledge could be an opportunity to showcase truly sustainable design, or it could result in new builds that are energy inefficient to ‘quick fix’ the housing crisis.”
The King’s Speech
In contrast to the previous King’s Speech in 2023, this one contains many positive environmental actions – although there is a lack of detail on the green economy per se.
We sought the expert view of Shaun Spiers, executive director of Green Alliance, who said:
“The King has told the nation that his new government ‘understands the urgency of the global climate challenge’, a dramatic and welcome change of emphasis. To seize this opportunity, the Government needs to set out which of the UK’s green industries it will back and provide policy and political certainty for private investors to follow public funding.”
The green finance capital of the world
Labour’s goal is to make the UK the “green finance capital of the world […] mandating UK-regulated financial institutions – including banks, asset managers, pension funds, and insurers – and FTSE 100 companies to develop and implement credible transition plans to reach the 1.5°C goal of the Paris Agreement.” 3 This really is a call to arms for the financial industry
The resurgence of a thriving green economy will be vital for progress. To drive this, Chancellor Rachel Reeves has announced a £7.3bn flagship National Wealth Fund to decarbonise Britain’s industry, fuel the green transition and create 600,000 green jobs. Leveraging public funds to attract private investment will be a vital part of the shift.4 The fund aims to raise £3 of private investment for every £1 of government money put in.5 A windfall tax on oil and gas companies will also support this, along with reforms to the British Business Bank to direct institutional capital towards low-carbon investments.
These measures and a shift towards prioritising the environment will create significant change. As Steven Pyne said, “Unfortunately, the past Government reduced confidence in sustainable investments by diluting green policies and as a result, some argue that corporate investment fell away. With the increased political emphasis on the environment, it’s possible that there will be a surge in interest in green investment. If the Government invests fast and at scale, increased confidence could much-needed private capital.”
He added that, “Perhaps we need to avoid growth at all costs and instead can have an approach that gives the environment actual value and takes a longer view than short term political cycles.”
The impact of the Sustainability Disclosure Requirements (SDR)
The industry is coming to terms with the new SDR requirements. In the short term this could mean a reduction in sustainable investment options, but over the longer term clear labelling which enables clients to understand what’s in a portfolio (much like food labelling) can only be a good thing. We therefore expect that in time the new regulation will prove to be a force for good.
This is likely a temporary blip. With the new Government prioritising the green economy there should be a quick response from the industry as it grapples with ensuring compliance. Steven explains, “Longer term, SDR is likely to be helpful, bringing rigour to what could be a fast-expanding area. But in the short term, there is a risk that its complications and bureaucracy put the handbrake on the fast progress that is needed.” For more information on SDR and what it means in practice, read our overview.
Beyond the first hundred days
While the new Government tries to capitalise on the honeymoon period, we’re looking beyond the first hundred days. There are other innovative approaches that we’d like to see, for example, tax incentives for green investors would really increase the impact of this sector.
As the push for environmental action accelerates, consumer confidence will likely grow. The challenges of SDR will increase the demand for specialist sustainability experts, and Holden & Partners are well placed to meet this need with our many years of ethical investment experience. We’re also partnering with the leading ESG consultancy, ESG Accord, who will bring their ESG knowledge to support us. This new green era is potentially a very exciting time in our firm’s history.
2 Change Labour Party Manifesto 2024