Money

Labour eyes penalties for financers of climate change


The UK’s opposition Labour party is drawing up plans to penalise banks and hedge funds that “finance climate change” and to incentivise them to invest in green enterprises, in a sign that the environment will be a big general election issue.

John McDonnell, shadow chancellor, wants to use financial levers to help achieve a zero carbon economy by the 2030s, while the Tory government has a legally binding target of 2050.

Mr McDonnell, said: “It’s clear there is a long way to go before the finance sector is pulling its weight to achieve the rapid changes our economy needs to meet our climate obligations.”

He was speaking ahead of the publication of a report entitled Finance and Climate Change by a panel whose members included Bob Kerslake, former head of the civil service, academics and finance experts.

Labour says it wants to “go after” financial institutions that fund polluters, echoing party leader Jeremy Corbyn’s attack this week on supposedly unscrupulous landlords, hedge funds, media barons and employers.

Mr McDonnell, who commissioned the green finance report, said he would take on board its recommendations and put forward the party’s proposals in its election manifesto.

The shadow chancellor is considering making companies disclose the climate impact and risks of their activities as well as charging the Bank of England with taking more action to protect the climate — an agenda being pursued by governor Mark Carney.

Mr McDonnell’s argument starts from the idea that the government’s existing rules and regulations rely too much on the free market and contain “too much carrot and too little stick”.

The report seeks to tweak or transform incentives to promote lower carbon emissions across the financial services sector wherever government or financial regulators might have leverage.

It says that an ambitious green finance agenda needs “a clear description of what counts as green and what does not”, suggesting work to classify activities according to their “greenness and brownness”.

Labour would require companies to disclose the climate impact of their activities, so that a register of their “greenness” could be compiled. This is already under way with the Bank of England expecting all large asset owners to disclose their holdings under the “Task force on Green-related Financial Disclosures” initiative by 2022.

It would also set up a task force to encourage private finance to help a Labour government meet its commitment to zero net carbon emissions by 2030.

For the BoE itself, Mr McDonnell is looking into including “environmental sustainability” in the mandate for the central bank alongside monetary and financial stability.

The initial thinking is more modest, however, with the central bank being told to penalise banks that offer brown assets in exchange for cash and offering worse prices for the £10bn of corporate bonds the BoE holds under its quantitative easing programme.

In wider financial regulation, Labour is proposing forcing banks to hold more insurance buffers for polluting assets while a Labour government would consider a steeper rate of tax on the sale and purchase of shares in companies deemed to be major polluters.

The comprehensive package would be aimed at making it more expensive for polluting companies to raise finance and for lenders to provide it to them. Some of the rules would need to be deployed at a global level otherwise polluters would simply borrow from abroad.



READ SOURCE

Leave a Reply

This website uses cookies. By continuing to use this site, you accept our use of cookies.