Sustainable future: UK party pledges for asset managers

As investors focusing on sustainable investment, understanding the environmental pledges of major political parties is crucial for aligning portfolios with future regulatory landscapes and market trends. The 2024 manifestos of the Conservative, Liberal Democrat, Green, and Labour parties offer distinct approaches to environmental policies and sustainable investment.

Here, we delve into their pledges, highlighting the most pertinent details for asset managers.

File:Conservatives logo.svg - Wikipedia

Net zero and energy security

The Conservative manifesto emphasises a “pragmatic” approach to achieving net zero by 2050, balancing climate targets with economic impacts on households. Key points include:

  • Expanding offshore wind and nuclear power: Investments in offshore wind farms and new nuclear projects, including small modular reactors (SMRs).
  • Energy efficiency: A £6bn investment will enhance energy efficiency over the next three years, including an energy efficiency voucher scheme for households.

Governance and green levies

  • Net zero governance: Proposals include a parliamentary vote on future net zero targets and a reform of the Climate Change Committee to consider household costs and energy security.
  • Energy bills: The manifesto rules out further green levies on energy bills and aims to lower existing ones, impacting sectors relying on these funds.

Fossil fuels and carbon capture

  • Oil and gas licensing: Support for annual licensing rounds for new oil and gas drilling in the North Sea.
  • Carbon capture and storage (CCS): Commitments to build CCS clusters supported by a £1.1bn Green Industries Growth Accelerator.

Renewables and infrastructure

  • Electricity market and grid: Introduction of efficient local electricity markets and implementation of recommendations to reduce power connection waiting times.
  • Renewables: Continued investment in renewables, with a cautious approach to onshore wind and solar projects.

Sustainable transport

  • Electric vehicles (EVs): Support for the UK’s auto industry, including a Zero Emission Vehicle Mandate and enhanced nationwide EV charging infrastructure.

Nature and environmental protection

  • Nature restoration: Commitments to tree planting and peatland restoration targets, supporting urban greening, and maintaining the moratorium on fracking.
  • Waste management: A UK-wide Deposit Return Scheme and measures to prevent new waste incinerators.

Liberal Democrats (UK) - Wikipedia

Accelerated net zero and renewable energy

The Liberal Democrats propose more ambitious targets, aiming for net zero by 2045, focusing on rapid decarbonisation and public engagement:

  • Renewable nnergy: Targeting 90% of electricity generation from renewables by 2030, with significant investments in solar, wind, and other clean energy sources.
  • Restored 2030 ban on petrol and diesel vehicles: Reinforcing the transition to EVs by reinstating the 2030 ban on new petrol and diesel car and van sales.

Energy efficiency and public engagement

  • Home energy upgrades: A ten-year programme to fund insulation and heat pumps for low-income households, reducing energy consumption and enhancing efficiency.
  • Citizen assemblies on climate policy: Engaging the public in climate policy development to foster broader support for sustainable practices and investments.

Environmental governance and regulation

  • Enhanced environmental regulation: Increased funding for the Environment Agency, Natural England, and a new Air Quality Agency.
  • Corporate responsibility: A new duty of care for the environment and human rights in business operations and supply chains.

Transport and infrastructure

  • Active travel and public transport: A national active travel strategy and significant investments in electrifying and improving bus and rail services.
  • Rail fare freeze: A freeze on rail fares supports sustainable commuting, potentially increasing public transport usage.

Nature restoration and biodiversity

  • Doubling nature by 2050: Ambitious plans to double woodland cover, species abundance, and the size of protected areas.
  • Combatting sewage pollution: A new, tougher water sector regulator and measures to address sewage pollution.

Transformational energy transition

The Green Party manifesto outlines a comprehensive and ambitious approach to environmental sustainability:

  • Increased renewable energy targets: Extending the offshore wind target to 80GW by 2035, increasing the solar target to 100GW by 2035, and setting a new target for 53GW of onshore wind by the same deadline.
  • Phasing down fossil fuels: Ending all oil and gas subsidies, halting new North Sea oil and gas licensing, and cancelling recently awarded licenses for large projects.

Carbon tax and business decarbonisation

  • Carbon tax: Introducing a carbon tax of £120 per tonne, initially applied to fossil fuels and heavy industry, gradually increasing to £500 per tonne over a decade. This tax could raise up to £80bn.
  • Business decarbonisation grants: Annual grant funding of £2bn for business decarbonisation, targeted at SMEs, provided to local authorities.

Energy efficiency and heat transition

  • Home retrofit programme: A ten-year program with £29bn provided in the first five years for home insulation.
  • Heat pumps: £9bn allocated over five years to subsidise the transition to heat pumps for homes and non-domestic buildings.

Governance and environmental protection

  • Rights of Nature Act: Granting human rights to nature itself.
  • Public ownership of water companies: Taking water companies into public ownership.
  • New Clean Air Act: Strengthening air quality regulations.
  • Increased international aid: Boosting the UK’s contribution to the Loss and Damage Fund and increasing financial support for farmers.

Sustainable transport and food systems

  • Transport subsidies and electrification: £10bn in subsidies for bus and rail travel, and an additional £19bn for active transport and transport electrification.
  • Food systems: Enhanced targets to improve biodiversity and soil health, policies to tackle food waste, and a ban on airport expansion and domestic flights for short journeys.

Decarbonised electricity and green investment

The Labour Party’s manifesto emphasises a significant investment in low-carbon industries and a rapid transition to a decarbonised electricity grid by 2030:

  • Green industrial strategy: A £7.3bn investment in key low-carbon sectors, including £2.5bn for steelmaking, £1.5bn for Gigafactories, £1.8bn for decarbonising ports, £1bn for carbon capture, and £500m for green hydrogen.
  • Energy transition: Committing to quadruple offshore wind capacity, treble solar capacity, and double onshore wind capacity by 2030. Additionally, supporting large-scale and small nuclear projects.

Governance and funding certainty

  • Modern industrial strategy: Introducing a ten-year infrastructure strategy and ending short funding cycles for key R&D bodies in favour of ten-year budgets.
  • Business taxation roadmap: Capping corporation tax and providing a four-year roadmap for business taxation to offer certainty for businesses.

Energy security and green jobs

  • Great British Energy: Establishing a publicly owned business to invest in renewable energy projects, receiving £8.3bn within the next Parliament.
  • Grid upgrades: Committing to upgrading the energy grid to reduce connection times and ensuring long-term energy storage solutions.

Environmental protections and sustainable practices

  • Home energy efficiency: Investing an extra £6.6bn in home energy efficiency improvements, with a requirement for private rented properties to meet EPC C or higher by 2030.
  • Transportation and infrastructure: Promoting rail freight, accelerating rail electrification, reforming bus services, and improving active travel networks.
  • Nature and biodiversity: Creating new National River Walks, three new National Forests in England, and restoring woodlands, forests, wetlands, and peat bogs.

Implications for asset managers

Risk and opportunity assessment

The distinct approaches of each party present varied opportunities and risks for sustainable investment. The Conservative’s focus on nuclear power, CCS, and cautious renewable expansion suggests stability but with traditional energy reliance. The Liberal Democrats’ aggressive renewable targets and comprehensive energy efficiency programs indicate rapid transition potential. The Green Party’s transformational policies on renewables, carbon taxes, and extensive green economy support offer significant opportunities but come with substantial regulatory changes. Labour’s comprehensive green industrial strategy and decarbonised electricity grid by 2030 provide substantial investment opportunities in green technologies and infrastructure.

Policy and regulatory alignment

Aligning portfolios with likely regulatory frameworks is essential. The Conservatives’ emphasis on cost-effective energy solutions and maintaining oil and gas production may favour transitional energy investments. The Liberal Democrats’ stringent regulatory stance and focus on biodiversity could benefit renewable energy and ESG-compliant companies. The Green Party’s ambitious targets and comprehensive green policies signal a shift towards deep decarbonisation and extensive sustainable practices, offering vast investment opportunities in green technologies and infrastructure. Labour’s focused investment in low-carbon sectors and infrastructure upgrades offers a balanced approach to green growth.

The 2024 manifestos of the Conservative, Liberal Democrat, Green, and Labour parties offer diverse visions for the UK’s environmental future. For asset managers, these pledges underscore the importance of strategic alignment with policy trends to leverage opportunities and mitigate risks in the evolving landscape of sustainable investment.

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