The Green Party has pledged to implement requirements for non-bank financial institutions, such as pension funds and mutual funds, to mandatorily divest from fossil fuels by 2030, as it unveiled its 2024 General Election manifesto today.
The Party has also promised to change the Bank of England’s (BofE) mandate to make the green transition a central objective, alongside price stability.
The Greens, led by co-leaders Carla Denyer and Adrian Ramsay, said that under its plans the Bank would be required to mainstream the climate crisis into its strategic thinking and produce a carbon-neutrality roadmap for the financial system, including forward planning scenarios consistent with a 1.5°C warming limit.
Other proposals include requiring the BoE to adopt a policy of credit guidance to direct lending towards a “just and urgent” sustainability transition, with credit bans and ceilings for unsustainable activities.
The Financial Conduct Authority (FCA) would be instructed to develop targets to eliminate all equities relating to fossil fuel exploitation from the UK stock market and “immediately prohibit” the issuing of any new shares for those purposes, the manifesto states.
Moreover, any company holding a UK banking licence would be required to present an investment strategy outlining a “clear pathway” to the divestment of its current fossil fuel assets “as soon as possible”, and at least by 2030.
The proposals are among a raft set out in the manifesto today to accelerate the shift to net zero “as soon as possible”, including plans to ramp up investment in renewable energy, home insulation and public services, funded by an overhaul of the UK’s the tax system. The Party would aim to raise £70bn from personal tax reforms including a National Insurance tax hike, a capital gains tax reform, and a new wealth tax, in addition to fresh new carbon and windfall taxes to raise further revenues.
Environmental groups broadly welcomed the manifesto and its plans to harness public spending to accelerate action on the climate and environmental crises.
But some investment figures were more critical of the financial policies included in the manifesto. Matthew Downey, investment consultant at Broadstone, said a mandatory divestment policy “could have unintended consequences”.
“If pension schemes are mandated to remove fossil fuel assets, we do worry that these may be bought up by hedge funds and other investors who may not be as interested in how the underlying companies operate,” he said.
With regards to the plans for the FCA to stop shares linked to fossil fuel exploitation, he said there are “potential loopholes that could be exploited” as the current wording does not prohibit debt financing.
“That said, supermarkets make money by selling fuel, banks may finance oil and gas firms, and there is even an airline in the FTSE 100, so depending on how the targets are set, they could have a significant impact on the UK stock market,” Downey added.
A version of this article originally appeared at Investment Week.
