General Election 2024: What Labour and the Conservatives say on sustainability and sustainable finance

Harriet O’Brien looks at the pledges in the manifestos.

The General Election is almost upon us. So, what are the parties saying on sustainability, net zero, and sustainable finance. We’ve summarized the main pledges made by the two leading parties – the Conservatives and Labour – to bring insight and clarity to this important policy area.

Conservative policy

Let’s start with a quick recap. Climate policy and sustainable finance has received very mixed support under the past 14 years of Conservative rule. Despite his climate-friendly election campaign (“hug a husky”) in 2013 David Cameron reportedly vowed to “get rid of all the green crap.”

But then in 2019 Teresa May’s government made a world-leading commitment to reach net zero by 2050. In 2021 the government ramped up the national commitment, pledging to reduce emissions by 78% by 2035. Targets were accompanied by plans such as the Net Zero Strategy which included commitments to end the sale of new petrol and diesel cars from 2030, increase renewable energy production, and phase out gas boilers. At COP26 in Glasgow in 2021, then Chancellor Rishi Sunak set out plans for the country to become the first net-zero aligned financial centre in the world.

But the Tories have also faced criticism for watering down and back-tracking on policies (for example on onshore wind, fracking, energy efficiency, and the timings for phasing out of petrol cars and gas boilers, amongst others). In 2022 and 2024 successful legal challenges meant the government was twice obliged to rewrite its climate policies to meet the UK’s legally binding carbon budgets.

A recent survey found that two in three (65%) companies surveyed have already moved or plan to move investments out of the UK to a market that is more supportive of their sustainability goals.

In January 2024 Conservative Energy Minister and author of the government’s Net Zero Strategy, Chris Skidmore, resigned over the decision to issue new oil and gas licenses in the North Sea, claiming the government was “abandoning its climate leadership” and ignoring the significant economic opportunities posed by investment in a “green industrial revolution”, causing the UK to fall behind those (like the US and EU) who are now pursuing those policies in earnest. Skidmore just recently revealed he plans to vote for Labour in the upcoming election.

For the sustainable finance community, the lack of a supportive regulatory regime and clear policies have long been a complaint. A recent survey by industry body UKSIF (UK Sustainable Investment and Finance Association) found that two in three (65%) of companies surveyed (representing around £1 trillion ($1.26 trillion) in annual turnover) have already moved or plan to move investments out of the UK to a market that is more supportive of their sustainability goals.

Meanwhile, it also found that 95% of UK large financial firms would be willing to increase their investment in the UK if favourable policies were implemented. Those affected by delays and inconsistent policies claim the government has undermined confidence in the country as a secure environment for responsible investment.

And that brings us to now.

Pragmatic and proportionate

In the 2024 election campaign, Prime Minister Rishi Sunak has promised a “pragmatic and proportionate approach to net zero” avoiding what he calls “unaffordable eco zealotry.” While the Conservative leader claims he is committed to reaching net zero by 2050, he has also pledged “no new green levies or charges” and committed to supporting the expansion of North Sea oil and gas production as well as developing new gas power stations, nuclear and carbon capture and storage projects.

The Conservatives are also promising to ramp up investment in renewables (trebling offshore wind capacity), improve grid infrastructure to facilitate renewables, and bring in a “democratic consent” process enabling affected local communities to have a say in the development of onshore wind projects.

Despite several nods to energy transition, the Conservatives remained largely quiet on sustainable finance, possibly due to having been widely criticised for delays and a lack of clarity in the roll out of the nation’s sustainable finance regulatory framework (the long-awaited UK Taxonomy).

Overall, the Conservatives seem to have adopted the age-old stance that sustainability is expensive and therefore undesirable; they’ve even pledged to force the Climate Change Committee to consider how its climate recommendations will affect household costs and energy security. Given popular sentiment for climate action and continuing business calls for policy ambition and certainty in this area, this approach seems something of a gamble. But no doubt they have their reasons.

Labour policy

Labour claims it will “make Britain a clean energy superpower”. This includes pledges to set up a new publicly-owned company, Great British Energy, to increase investment in clean energy projects. The party is also promising to significantly increase spending on renewables including doubling onshore wind by 2030, doubling insulation spending, tripling solar energy and quadrupling offshore wind. Labour will not issue any new licenses for North Sea oil drilling and coal mining.

Labour has also vowed to increase spending on energy efficiency to support home owners to make low carbon improvements (for example installing solar panels, batteries and heat pumps). As well as a plan to bring in more private finance options (such as green loans and mortgages) to fund upgrades. It is also promising to create a National Wealth Fund to support energy intensive industrial sectors such as manufacturing, energy and ports to decarbonise.

Labour claims it will fund its green plans through an extension to the windfall tax on oil and gas companies, including increasing the rate of the levy by 3% and removing the current allowances.

While quite a few elements of the Green Prosperity Plan made it into the manifesto, there is no mention whatsoever of the Financing Growth Plan or the majority of its content.

Generally speaking, this all sounds good from a sustainability perspective. But Labour has been talking about sustainable growth for some time, publishing not one but two plans with a strong sustainability angle in the run up to the election (Financing Growth Plan, and Green Prosperity Plan). And while quite a few elements of the Green Prosperity Plan made it into the manifesto, there is no mention whatsoever of the Financing Growth Plan or the majority of its content.

The manifesto lacks detailed implementation plans to back up Labour’s promises. For example, while Labour confirmed its intention to make the UK the “green finance capital of the world”, it neglected to provide a detailed plan for how to get there, noting only that it will oblige financial institutions to produce 1.5°C aligned transition plans. Perhaps we’ll get more information on what that means later but for now, it’s all a bit vague.

UK Green Taxonomy

Similarly, no sign in the manifesto of Labour’s earlier plans to set a clear timeline for the delivery of the delayed UK Green Taxonomy or to align with key sustainable finance frameworks such as the International Sustainability Standards Board (ISSB) and the Transition Plan Taskforce (TPT) disclosure framework.

On the plus side, Labour has committed to much-needed investment in renewables and energy efficiency, making particular reference to bringing in the private sector to support homeowners to make sustainable improvements, presumably as there they aren’t expecting loads of spare cash to be available to fund all their plans.

Overall Labour has some very sensible ideas but it seems a shame the Party didn’t feel confident enough to commit to the more detailed and bold plans it made earlier. The result is a manifesto somewhat lacking in courage on sustainability.

The view from Danesmead

Unsurprisingly, Labour is offering a somewhat more ambitious range of pledges on sustainability, and if it manages to implement it all, it could make a decent impact.

But what about the stuff that has been left out? Will we see Labour reopen the discussion on the sustainable finance regulatory system following the election, or has it decided to ditch those plans? And will it provide some actual detail on what it will do to make the UK a global leader in clean power, explain how companies are expected to implement 1.5°C aligned transition plans, or provide more detail on what it will actually do to improve the planning system to facilitate grid connections for renewable technologies? Perhaps it thought these details were too boring for a manifesto, or perhaps it hasn’t decided yet.

Meanwhile, the Conservatives have made small concessions to sustainability while doubling down on fossil fuel projects and sticking with an anti-green rhetoric that does not seem to match the public’s sentiment. Take by way of example a recent survey that found the public is more concerned about climate change, nature, and plastic pollution than immigration, housing, or crime. Another by the Department for Business, Energy & Industrial Strategy (BEIS) in 2023 found that 82% of respondents considered climate change to be either very or fairly important.

On sustainability, Rishi Sunak and the Conservatives must undoubtedly tread a careful line, providing reassurance to traditional (and older) conservative voters and the vocal anti-woke brigade, while also appealing to the business and finance communities who have typically supported them, and who continue to call for clarity and certainty in policy to help make the UK competitive with its more ambitious neighbours, the US and EU.

This time next week we will know the result of the General Election, and the real work to embed the winning party’s pledges will begin. We’ll be back then with more details on what the new government needs to do to drive forward sustainability and make the UK a leader in sustainable finance.

Harriet O’Brien is an experienced ESG consultant at Danesmead ESG. Danesmead ESG provides ESG services for investment managers, specialising in Private Equity and Hedge Funds.