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17 June 2024

Election 2024: What are parties' plans for green investment?

We look at the main UK political parties’ plans to increase green investment and crack down on fossil finance, as well as the gaps that need filling.

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The Green Party


The Green Party’s manifesto outlined an ambitious approach to greening the financial system, which aligns with much of Positive Money’s thinking.

The Greens would change the Bank of England’s mandate “so that funding the sustainability transition becomes a central objective, alongside the maintenance of price stability”. This could perhaps mean the Bank of England (BoE) supporting green investment with green monetary policies which could take a range of forms, as our Green Bank of England report from 2018 explored. At its most radical end, the BoE could undertake green overt monetary financing as an alternative to conventional quantitative easing, buying zero-interest-bearing perpetual bonds from the Treasury to finance government deficit spending on green projects. However such monetary financing may be a particularly unlikely prospect if inflation is above target. Instead we might expect to see green financing schemes, where the Bank of England provides cheap funds to financial institutions investing in the transition.

The Greens would also have the Bank “produce a carbon-neutrality roadmap for the financial system”, and Positive Money’s thinking is also echoed in proposals for green credit guidance policies, such as bans and ceilings on unsustainable activities. All UK banks would “be required to present an investment strategy outlining a clear pathway to divestment of current fossil fuel assets as soon as possible, and at least by 2030.” Addressing the risk of fossil fuel investments shifting to the shadow banking sector, the Greens sensibly also put forward a similar proposal for non-bank financial institutions.

The Green Party has also outlined a promising proposal to set up “regional mutual banks to drive investment in decarbonisation and local economic sustainability”. They propose that these banks would be capitalised through a ‘Co-operative Development Fund’, using funds from the UK Infrastructure Bank (UKIB), along with an additional £10bn of public money. It is unclear how much funding would actually be made available from UKIB, given its relatively small financial capacity of £22bn, and its inability to leverage its own balance sheet to raise additional funds. We hope to provide more ideas for how to scale-up investment through such institutions in a forthcoming paper.

The Labour Party

There was not much new detail on green finance in the Labour Party’s manifesto, but some welcome commitments were restated.

Labour will reverse the government’s recent decision to “prevent the Bank of England giving due consideration to climate change in its mandates”, referring to the downgrading of climate in the Bank’s remit letters, which we have criticised. This was first announced by Shadow Chancellor Rachel Reeves in March, and will hopefully mean climate featuring more prominently in Reeves’ remit letters to the Bank in Labour’s first Budget. This should empower the Bank to take more action against the threat environmental breakdown poses to price stability and the financial system.

Labour confirming plans not to issue new licences to explore new oil and gas fields in the North Sea is also positive, as such projects would be incompatible with pathways to net zero put forward by the likes of the International Energy Agency. However, this raises the question of whether UK financial institutions will still be allowed to invest in similar projects overseas, as they have done to the tune of hundreds of billions of pounds in recent years. Such investments would have the same impact on the climate that we share, but with even less benefit to the UK economy Labour seeks to boost.

When it comes to regulating fossil finance, Labour’s manifesto restates previously trailed proposals to mandate UK-regulated financial institutions and FTSE 100 companies to develop and implement credible transition plans that align with the 1.5c goal of the Paris Agreement. This is another positive step, though there may still be questions around the scope and detail of transition plans, and enforcement - for instance, will there be penalties for non-compliance, in a similar manner to how the European Central Bank is penalising European banks who fall short of climate goals?

It is nonetheless disappointing that public investment via Labour’s flagship Green Prosperity Plan has been downsized from £28 billion a year to £4.7 billion. However, there may be scope to scale up investment through other channels referenced in the manifesto, such as the British Business Bank (BBB), a publicly owned development bank that Labour says it will reform with “a stronger mandate to support growth in the regions and nations”, especially if coordinated with a new infrastructure strategy. Allowing public institutions like BBB and UKIB to leverage their own balance sheets and issue debt could be a key means of scaling up investment, especially if they are excluded from fiscal rules, as is the international norm. This is something Positive Money is exploring further in an upcoming paper, as mentioned above.

The Liberal Democrats

The Liberal Democrats’ manifesto also suggests bigger roles for public banks to support green investment. They pledge to give UKIB “a clearer zero-carbon remit”, and expand the BBB to “perform a more central role in the economy, to ensure that viable small and medium-sized businesses have access to capital, and enable it to help ‘crowd-in’ private investment, in particular in zero-carbon products and technologies.

The manifesto also includes a positive commitment to “Regulating financial services to encourage climate-friendly investments, including requiring pension funds and managers to show that their portfolio investments, including requiring pension funds and managers to show that their portfolio investments are consistent with the Paris Agreement, and creating new powers for regulators to act if banks and other investors are not managing climate risks properly.” As with Labour above, there are questions about what enforcement powers regulators will be equipped with.

The Conservative Party


There does not appear to be any specific mention of green finance in the Conservative Party’s manifesto this time around. However, like other parties, the Conservatives pledge to explore the creation of Regional Mutual Banks, which could play a role in providing green investment to local economies. 

While the Conservatives also keep their ambition for the UK to be a ‘competitive’ financial centre (which critics suggest puts an impetus on deregulation, which may undermine decarbonisation efforts), the party pledges to “maintain the highest standards of consumer protection and prudential regulation”. We’d hope this would translate into stronger regulation of fossil fuel investments, to reflect the risk they pose to the financial system and consumers.

Reform Party

The Reform Party’s ‘contract’ with voters comes in much shorter than the others, at only 32 pages, so it is perhaps unsurprisingly that it doesn’t say much on green finance. The Party does propose to overhaul and merge the National Infrastructure Commission and UKIB, and suggests it would boost funding, but it also pledges to “Scrap all Net Zero related objectives.”

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