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Fossil Fuel Industry: Regulation of Investments

Volume 701: debated on Tuesday 19 October 2021

Motion made, and Question proposed, That this House do now adjourn.—(Scott Mann.)

In 1998, a PR consultant was working with big fossil fuel companies. He was grappling with a problem: the Kyoto protocol had just been signed. This landmark agreement reflected the scientific consensus that human-made carbon dioxide emissions were driving global warming and threatening climate catastrophe. It committed Governments to cutting carbon to avert this calamity. But for the PR consultant and fossil fuel companies, this was not a step forward—it was an existential problem. If Governments cut carbon, that would mean less oil bought and sold. It would mean smaller dividends for big oil’s shareholders and smaller bonuses for executives. Profits for fossil fuel companies were under threat, and they could not have that.

So the PR consultant devised a plan. In a memo to the trade association of the fossil fuel companies, he outlined a plan: a comprehensive, international campaign to change public opinion on the climate emergency. The plan aimed to cast doubt on the scientific consensus, by funding think tanks and media campaigns, and buying off a tiny minority of scientists. The campaign aimed to manufacture doubt about the science of the climate emergency. The PR consultant wrote that the goal of the project was for the public to “recognise that significant uncertainties exist in climate science.”

Victory, he said, would be achieved when

“those promoting the Kyoto treaty on the basis of science, appear to be out of touch with reality.”

But it was not that the fossil fuel companies were ignorant of the science—far from it. In 1979, a paper from the global oil giant Exxon said that the burning of fossil fuels

“will cause dramatic environmental effects in the coming decades.”

A few years later, another memo warned of the “potentially catastrophic” consequences of a refusal to cut emissions. In 1982, an internal document admitted that the science was “unanimous”. But because their profits were threatened, fossil fuel companies buried the truth. Just as the PR consultant advised, the companies poured millions into think-tanks, scientists and politicians who spread climate denial. In 2001, when President George W. Bush rejected the Kyoto protocol and its ambition to cut emissions, he told a fossil fuel-funded lobby group that his decision was

“in part, based on input from you”.

Today, although the fossil fuel industry’s methods might have been updated, its aim remains the same. More than 95% of the expenditure of fossil fuel giants such as BP is on oil and gas, but they spend millions on advertising campaigns that boast about their meagre low-carbon energy output.

I thank the hon. Lady for bringing this important issue to the House for this Adjournment debate. Does she agree that our eco-responsibility can and does extend into all aspects of our lives? Does she accept that we have a fiscal responsibility to ensure that any divestment of pension funds does not result in slashed pensions but enables investors to be beneficiaries in not only conscience but finance?

I thank the hon. Gentleman for that contribution. I will come on to our pension fund and our responsibility to divest, especially as we are hosting COP, which brings urgency to that.

Shell has spent $84 billion on fossil fuel exploration and development in the space of a few years, but it then asks its social media followers what consumers need to do to cut carbon. As a Harvard expert on the fossil fuel industry’s lobbying put it, these companies have gone from “blatant” denialism to

“more subtle and insidious forms of delayism.”

This is just the tip of the iceberg. The fossil fuel industry’s historical record is being uncovered, showing how it has spent decades propagating climate denialism and disinformation—protecting its profits while endangering our future. There is no doubt about it: these companies do not have our welfare at heart. They do not have the same interests as my constituents. What is good for fossil fuel billionaires spells disaster for children in Coventry’s schools. If there are profits to be made, these companies will extract and exploit, burning fossil fuels and our planet along with them.

Next month, Britain hosts COP26. We have a responsibility to show leadership on the world stage, demonstrating that we will rise to this historic challenge with the bold actions needed to avert climate catastrophe, taking on fossil fuel executives and transforming our economy for people and planet. Here is how the House must contribute to this historic task. First, Members of this House past and present are automatically members of a pension fund—a fund that invests in climate-destroying fossil fuel companies. Put simply, our pensions fund environmental destruction. For younger Members like me, on current trajectories, by the time I am old enough for my pension, temperatures will have soared well above the 1.5°C required by the Paris agreement, collapsing food systems, melting ice caps and causing extreme weather to become the norm.

With the world’s eyes now on us, we in this House can demonstrate real leadership by divesting Parliament from fossil fuels, and showing public commitment to taking our money out of the deadly fossil fuel industry and instead putting it to the public good and investing in the green technologies of the future. More than 360 current and former MPs from all parties in the House have pledged to support the Divest Parliament campaign. Under that pressure, and after letters from myself and colleagues, investments in the fossil fuel industry have fallen, but they have not been eliminated. There is still no plan to align our pensions with the 1.5°C global heating limit, and the full portfolio of investments remains a secret. So, as we prepare to host COP26 we in this House are still funding climate destruction. Here is my message to the pension fund trustees today: reveal the fund’s full investment; divest fully from fossil fuels; and show that this House will lead the fight to save our planet.

Back-Bench Members can do only so much. Real change must come from those on the Government Front Bench, because while the Government hide behind empty slogans and meagre promises, they back investment in new fossil fuel projects—from the Cambo oilfield where 170 million barrels of oil are set to be extracted, which will emit more than 10 times Scotland’s annual carbon output, pouring fuel on the fire of a burning planet, to investments abroad such as the Mozambique liquid natural gas project, to which the Government pledged more than $1 billion in financial support, fuelling not just climate breakdown, but human rights abuses, too.

Then there are the subsidies that the Government provide to the fossil fuel sector, recently estimated to be as much as £12.8 billion a year, ranking the UK as one of the worst of the OECD nations. These subsidies mean that, while Shell reportedly paid the Norwegian Government £1.3 billion in taxes in a year, in the UK, Shell itself was paid a rebate of £72 million of public money. That is scandalous. The Government cannot hide behind misleading definitions and technicalities and they must stop subsidising an industry that is killing our planet.

Then there is the role of British banks. The Government like to boast about London being the heart of the global financial system, but forget to mention that British banks are world leaders in funding fossil fuel companies. UK banks Barclays and HSBC rank among the worst in the world, having provided £158 billion in fossil fuel finance since the Paris agreement was signed, handing the likes of Shell and BP the fortunes they need to extract the fuels that are setting our world alight.

If we are to avert climate catastrophe, in place of a financial system that puts fossil fuel profits before people and planet we need a wholesale rewiring of financial institutions, putting capital to work for the public good, not private greed. We need a much wider economic transformation, too. We need a programme of change to avert climate catastrophe and to transform our economy and society in the interests of the many. That is the green new deal. I am proud to be co-sponsoring the Green New Deal Bill, alongside colleagues including the hon. Member for Brighton, Pavilion (Caroline Lucas) and my hon. Friend the Member for Norwich South (Clive Lewis).

The green new deal recognises the urgency of tackling climate breakdown, with a 2030 net zero target—not the 2050 target that condemns us to climate catastrophe—and it would reach that target through decarbonisation with the interests of working people front and centre. Yes, it means rapidly winding down and repurposing the fossil fuel industry by taking majority public stakes in fossil fuel companies, but doing so while every worker impacted gets a Government-backed jobs guarantee, ensuring that they get a well-paid, unionised job and are not left on the scrapheap as has happened in past industrial transitions.

The green new deal would not stop there. It would initiate a massive state-led programme of investment in green industries, from building the wind farms and solar panels to power our future to generating the low-carbon jobs in care and teaching that our communities need. Our Bill spells out how this programme would create millions of good, well-paid unionised jobs, and it would not be paid for off the backs of our workers. It spells out that a green new deal would raise income taxes only on the highest earners and introduce a wealth tax to make the super-rich pay their fair share. To transition from an economy that relies on fossil fuels that kill our planet, it would bring industries such as rail, energy and water into public ownership to rapidly cut carbon, building a high-tech, low emissions, publicly owned transport of the future.

So long as this Government and this House—us MPs—fund the fossil fuel industry, backing new projects such as the Cambo oilfield and pipelines across southern Africa, they can speak with no authority at COP26. They are not part of the answer to the climate emergency; they are simply part of the problem. Instead of investing in fossil fuels, it is time to invest in a green new deal. There is no time to waste.

I congratulate the hon. Member for Coventry South (Zarah Sultana) on securing this debate on an issue that we all agree is of crucial importance. I will do my best to do justice to this broad and complex issue in the allotted time, focusing my remarks on my brief as Economic Secretary to the Treasury, with oversight of financial services, which the hon. Lady mentioned on a number of occasions.

Let me begin by stating the obvious: the Government take their responsibility to tackle climate change extremely seriously. That is why in June 2019 the UK became the first major economy to legislate to end our net contribution to climate change by 2050, increasing the ambition of existing commitments under the Climate Change Act 2008, which was introduced by the Labour Government in that year. Just today, we published our net zero strategy, outlining measures to transition to a green and sustainable future.

The hon. Lady is right to highlight the crucial role of finance and investment in addressing the challenge of climate change. I am pleased to reassure her that we are implementing a credible, practical plan to align that investment to climate change goals, with multiple strands of activity, including engagement with the oil and gas industry, the greening of finance and action on the international stage.

Our view is that we need actively to engage with and work with fossil fuel companies to get them to reform, and that approach is working. Earlier this year, we agreed the North sea transition deal with the oil and gas industry, to support workers, businesses and the supply chain in preparation for a net zero future by 2050, including the reduction of emissions by 50% by 2030. We also agreed joint Government and oil and gas sector investment of up to £16 billion by 2030 to reduce carbon emissions, with up to £3 billion to replace fossil fuel-based power supplies on oil and gas platforms with renewable energy, up to £3 billion on carbon capture, usage and storage, and up to £10 billion for hydrogen production. Indeed, since 2010 more than £94 billion has been invested in clean energy in the UK.

From my perspective as City Minister, we clearly also need continuous and increasing green investment right across the board, as the hon. Lady called for. I am delighted that yesterday we published “A Roadmap to Sustainable Investing”, which will help every financial decision—and decision maker—to take climate and the environment into account.

Does the Minister support the call that I made in my speech to divest from fossil fuels in our pensions fund? Will the Government support the more than 360 MPs who are supporting the Divest Parliament campaign? It is really important to make the statement ahead of COP26 that this House is committed to divesting, fully and immediately, from fossil fuels.

It is absolutely the case that the UK pensions and investment sectors—asset owners, asset managers and the service providers that support them—have an important role to play, using their influence and ownership rights over investee companies while fulfilling those fiduciary responsibilities. The Financial Reporting Council’s stewardship code 2020 sets that gold standard for such stewardship activities. The Government expect asset owners, managers and their service providers to progress work on stewardship within their organisation. That will obviously be a matter for the trustees of individual funds to attend to.

The roadmap on sustainable investment sets out details of the new whole-economy sustainability disclosure requirements—the legislative and regulatory changes that will be made to deliver world-leading reporting standards for environmental sustainability. Under these changes, companies and investment products will, for the first time, need to set out the environmental impact of the activities that they finance according to a universal definition of green. At the same time, products must clearly justify any sustainability claims that they make. It is our expectation that firms will use this information to actively engage with investee companies and encourage businesses and shareholders to set, and act on, credible net zero transition plans.

But I recognise that Government too must take action. Another part of our strategy has therefore been to establish markets to mobilise private capital. That is the thinking behind our green gilt, the first issuance of which last month was the largest ever sovereign green bond issuance, of £10 billion, and was 10 times over-subscribed. It is also part of the rationale for the creation of the UK Infrastructure Bank, which has a specific mandate to help tackle climate change, particularly the transition to net zero by 2050. I was pleased just last week to meet John Flint, the chief executive, who is putting together the team at the UK Infrastructure Bank in Leeds to move forward the investment decisions, and that organisation, as quickly as possible.

Looking at the financial numbers, there are already some grounds for optimism. The UK’s world-leading investment banks are consistently ranked at the top of the global green and sustainable debt underwriting league tables. In the UK, almost half—49%—of the £9.4 trillion in assets were integrating ESG, or environmental, social and governance, in their investment processes last year, up from a reported 37% the previous year. In other words, as City Minister I see a sector that is increasingly innovating and investing in green. On the hon. Lady’s point, that does not mean that we are complacent, but it does demonstrate the irreversible direction that has been set and the progress that is rapidly being made.

We need to remember that this is also a global problem requiring a global solution, as the hon. Lady acknowledged. That is not an excuse for inaction but rather a simple acknowledgement of the reality. The Government are acting nationally and internationally, and here there are some further reasons for optimism. As a country, we need to be part of a global effort to turn this around, and we are, including as host of next month’s COP26 conference. About 70% of the world’s economy is now covered by net zero targets, up from less than 30% when the UK took on the presidency of COP26. Under the UK’s presidency, all G7 countries committed to put an end to funding fossil fuels and coal power this year. Japan and South Korea have said that they will end public financing for overseas coal-fired power plants, with China then committing to not building any new coal power plants overseas.

When it comes to transitioning the finance sector, too, we are part of an international effort. In April, the UK played a key role in the launch of the Glasgow Financial Alliance for Net Zero. When the UK assumed the COP presidency in partnership with Italy 18 months ago, $5 trillion of private financial assets were committed to net zero. Now 300 financial institutions across 40 countries, controlling balance sheets of $100 trillion, are co-ordinating their efforts under this alliance.

I agree with the hon. Lady that the stakes are high, but I hope I have shown that the Government are acting on many fronts in engaging, legislating and investing. I am certainly not complacent, just as the Government as a whole are not complacent. We will continue to do all that we can and all that needs to be done to address this global and significant challenge.

Question put and agreed to.

House adjourned.