I absolutely believe that business will help to deliver that solution even faster than 2050. My principal concern is that, in the headlong rush to get to that point, we must not treat businesses as collateral damage.
We have done that in the past. When we had a change of emphasis in lending back in 2008, that happened to some good businesses, as well as to some businesses that had probably borrowed inappropriately.
There is a very good business a few miles away from where I live called the York Handmade Brick company. It makes wonderful, handmade bricks, that look like old clamp bricks, for lots of houses around the country. It is a fairly small business employing about 20 people and is an award-winning company.
Its processes use fossil fuels – natural gas – to fire the bricks. Now, I can see a situation where, in future, banks may look at this business and say, “That business does not sit with our ethical and sustainable goals portfolio. Therefore, it is perhaps not a business we want to support.”
If that business needs to borrow some money to invest to move away from fossil fuels, for example, and move to other processes – biogas being an obvious one – what that company will need as it moves, down the line, to a different process, is money to invest. It is absolutely critical that our banking sector takes such businesses forward with us. MPs might say that is blooming obvious, but that is not always what we have seen in the past.
If we are going to get to net zero, it is absolutely vital that the private sector is taken with us. It will provide the cash and capital to invest in new processes and new techniques. We know for an absolute fact that the private sector is much better at allocating capital than the public sector. Investment will contribute towards innovation, and the solutions to climate change are about innovation. The more innovation and the more competitive free markets we have, the more our consumers get a better deal at a better price.
We are seeing some interventions from shareholders in banks, who are saying, “We do not want you to invest in these kinds of industries anymore.” Shareholder action groups will get increasingly vociferous, which could be to the detriment of small and medium-sized enterprises, and even bigger companies.
This is not just about SMEs: bigger companies will remember that last year, there were some protests by actors from the Royal Shakespeare Company regarding BP’s sponsorship of that organisation, which led to a parting of the ways between the RSC and its sponsor. That is despite the fact that BP is working within our overall regulatory framework, and will be incredibly important in the future in making the investment we need to move from a dependence on fossil fuels to a greater dependence on renewable energy.
We have seen this with recent shareholder action in terms of things like the Covid corporate financing facility, which is dispensed by the Bank of England. Again, there has been pressure from certain shareholder groups, saying that at this crucial time, when lots of businesses are in trouble because of Covid, support for those businesses should have been linked to environmental objectives. How unfair would it have been, when hundreds of thousands of businesses employing millions of people are in crisis, to link those supportive measures to sustainability goals at such short notice?
Any intervention by the Government must be comprehensive, well considered, strategic and stable. Our interventions should be consistent over a long period of time to get to that long-term goal.
One example I might give is the recent news that we will bring forward the date on which we move away from diesel and petrol cars. It was 2040; it has been brought forward to 2035, and has now been brought forward again to 2030. The motor manufacturers, of course, are gearing up for that, although it presents some real challenges for that sector during what is a difficult time anyway. What about the other businesses in that supply chain? Lots of other SMEs will have to make that change as well: those could be parts manufacturers, but they could also be forecourts. They are going to have to make massive changes over a very short period of time, so we must make these decisions in a strategic fashion.
Kevin Hollinrake is Conservative MP for Thirsk and Malton. This is an edited version of a speech he gave in a Westminster Hall debate.
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