John McDonnell's green finance proposals are closer to mainstream thinking than many of his critics would have you think
John McDonnell always seems to rather enjoy his reputation as the radicals' radical. Labour may have attempted to reach out to the business community in recent months, but it is hard to miss the unmistakable glimmer in the Chancellor's eye when the talk turns to nationalisations or which particular flavour of Marxism he is happiest endorsing.
The reputation for radicalism is justified and there is little doubt McDonnell and his allies are working on a programme that would, for better or worse, upend a host of economic assumptions if they ever got the chance to deploy it. But yesterday's green policy proposals are not necessarily as radical as they look at first glance.
The proposals to create a new 'banking ecosystem', rewrite the Treasury Green Book, establish a Sustainable Investment Board, build a network of regional investment banks, and give the Bank of England Financial Policy Committee more powers to tackle stranded high carbon assets could be the thin end of the wedge for massive state intervention or they could simply remain firmly in line with European social democratic traditions.
There is a very compelling argument that many of these measures, starting with the focus on overhauling the Treasury's notoriously short-termist culture, are long overdue. Indeed, if you squint much of McDonnell's green agenda is simply a modest step forward from Mark Carney's Taskforce on Climate-related Financial Disclosures and his 'tragedy of the horizon'. Indeed, Labour's new pitch comes just days after the Bank of England confirmed it would stress test the financial system in order to better understand unprecedented climate-related risks.
Even the relatively controversial proposal to stop firms listing on UK exchanges if they fail to adhere to basic standards are simply a step on from growing calls from plenty of mainstream investors for more robust climate risk reporting guidelines to be made mandatory. "We will give the Financial Policy Committee [within the BofE] the tools needed to tackle the risk to financial stability which comes from investments in polluting assets," McDonnell said. "And the Sustainable Investment Board will have responsibility for ensuring that the Bank of England is doing its bit to stop money flowing to projects that will kill the planet or destabilise our economy." All of which sounds pretty sensible, no?
McDonnell's references yesterday to the unifying power of post-war rebuilding were certainly conciliatory in tone. "That took an active interventionist state alongside a reviving business sector drawing upon the financial resources of the City," he declared. "In that spirit, with that same sense of urgency, we need to start work now."
UK Finance's response was similarly positive, with chief executive Stephen Jones declaring: "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. Banking and financial services will not be found lacking."
So why the continued concerns among some business leaders at the prospect of a Labour-led Green New Deal. After all, such a dramatic investment blitz would undoubtedly create plenty of green business opportunities and drive a lot of progress right across the green economy.
As so often with the Corbyn Labour Party it comes back to a question of trust. Would McDonnell deliver a strengthening of current green finance and reporting rules and institutions alongside a step change in public infrastructure spending which would be positioned as radical but would in fact be broadly in line with plenty of economic text books? Or will climate action provide a cover for the kind of asset-grabbing, state control that many business leaders remain wary of whenever they assess the chances of a Labour government?
Either way, with a general election a distinct possibility and the Conservative Party so fiercely divided, business leaders and investors should pay close attention to McDonnell's green plans. Radical or not he could get a chance to enact them sooner rather than later, and even if that opportunity never presents itself don't bet against other politicians from across the spectrum borrowing proposals that are far less controversial and 'anti-business' than Labour's critics would have you think.
A version of this article originally appeared in the BusinessGreen Overnight Briefing email, which is available to all BusinessGreen subscribers.
Dr Lorraine Whitmarsh is director of CAST (Climate change and Social Transformations) at the University of Bath
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