John McDonnell has announced a number of financial reforms, constructing a ‘new financial ecosystem’ centred around climate emergency. He revealed Labour’s new targets towards tackling climate change in his speech on the party’s plans for sustainable investment, which he sees as the ‘absolute priority’ of the next Labour government.
In the event that Labour wins an increasingly likely general election, McDonnell declares the dawn of a long overdue Green Industrial Revolution. It’s a movement that would address the environmental impact of everything we do, from ‘how we travel to work, what we do when we arrive there, and how we spend the money we earn there’. It did not go unmentioned that, as Western powers at the forefront of industrial progress and as the birth nation of the industrial revolution, the UK must take on responsibility for the ecological effects of this industry that disproportionately affects equatorial regions. There was an emphasis on investing in renewables.
In his speech, he announced the launch of a review group to overview the financial system and its environmental impact relating to climate change, where it causes or exacerbates climate change. Most importantly, the group will look at providing solutions to these problems. Plans include scrutinising the shadow banking sector and increasing investment transparency. It will also look into pensions.
He also declared that he will set up a Sustainable Investment Board, in line with the Turner Report recommendations. This would bring together the Chancellor, Business Secretary and Bank of England Governor to oversee the productive investment programme the country needs.
Legislation was proposed that would blacklist non-sustainable companies from the London Stock Exchange. They will be delisted if they fail to meet Environmental criteria.
McDonnell was confident that, if in place, these new policies would generate both positive change and a stabilised and regionally balanced economy, as well as creating upwards of 400,000 jobs.
McDonnell expressed support for recent protests by environmental activist network Extinction Rebellion in his speech. He highlighted that, although some people hinted they were peeved by the inconvenience caused by their action, it has led to a surge in public dialogue around climate change and environmental issues. This comes alongside a parliamentary declaration of climate emergency, and a general movement towards real and meaningful action combating continued environmental degradation.
Fran Boait, ethical finance champions Positive Money’s executive director, praised the move, responding:
“With the shadow chancellor’s comments coming the week after the future of finance report called for the Bank of England to rethink its priorities, it appears a new settlement for our financial system is in the making.
“Though the Bank rightly recognises the existential threat climate breakdown poses to financial and economic stability, it has shied away from taking the necessary action, frequently citing the constraints of its mandate and toolkit.
“As regulator of our financial system, the central bank has the ability to shape markets, penalising lending towards destructive carbon bubbles and incentivising productive green investment through policies such as credit guidance. But it is incumbent on the government to empower it to do so.
“Labour is right to look at updating the Bank of England’s toolkit to meet the challenges of the 21st century. The government must now follow suit.”
Clare Hymer, co-founder of Labour for a Green New Deal, said:
“Labour is responding to grassroots pressure with bold and ambitious new climate policies. Labour for a Green New Deal activists are passing motions across the country calling for democratic control of finance and an internationalist just transition, and we’re delighted that today John McDonnell has announced plans for a ‘new banking ecosystem’ and for British green technology to be made available free or cheap to the Global South.
“The free market has utterly failed to tackle the climate crisis, instead taking us to the brink of planetary breakdown. Our response must be to replace the profit motive with the social and environmental motive. A Labour government can and must use every lever available to democratise finance and fund a transformative Green New Deal. Today marks the first steps towards this just and sustainable future.”
Responding to the Shadow Chancellor John McDonnell’s speech today at UK Finance on the financial sector and climate change, Chief Executive of UK Finance Stephen Jones said:
“The Shadow Chancellor has today posed the question of whether the financial sector is up for rising to the challenge of climate change. Achieving net zero carbon by 2050 is a difficult but critical target that we must all work together to address and as an industry we stand ready to respond.
“Only last week the governor of the Bank of England credited the first steps taken by business, including financial services, to put in place the framework offered by the Taskforce on Climate-related Financial Disclosure.
“Describing what is needed as a “green industrial revolution” is by no means an overstatement. Banking and financial services will not be found lacking.”
As McDonnell points out, if we are to meet sustainability and climate goals, the role of government needs to go beyond ‘marshalling the public resources and institutional framework’.
The review group, made up of five sustainable and ethical finance experts, is due to submit its final report by October 2019. An International Social Forum will take place in two weeks, hosting discussions between activists, environmental scientists, economists, and more.