Insights
Labour's landslide victory in the UK elections is promising for climate action, but will their policies be investor-friendly enough?

Hajira Kamran
Policy Programme Manager
The Labour Party's 14-year period in opposition has finally ended with the result of the 2024 General Election, with Keir Starmer starting his term as the new UK Prime Minister. But what does this mean for investors?
The Labour Party secured a sizeable majority of 400+ seats, which could be a pivotal moment in British politics to end a prolonged period of political and economic instability. Hopefully, it also opens the door to greater climate action.
Labour has signalled a strong commitment to solidifying the UK’s climate leadership. Its manifesto reads:
"The climate and nature crisis is the greatest long-term global challenge that we face. The clean energy transition represents a huge opportunity to generate growth, tackle the cost-of-living crisis and make Britain energy independent once again.”
While the Labour Party's emphasis in their manifesto and election campaigning on clean energy initiatives, green finance and nature conservation is promising, does it offer enough reassurance for investors? Our analysis considers how the Labour Party's manifesto compares to the five key pillars from IIGCC's Call to Action, highlighting key policy recommendations that investors hope to see from the next UK government.
A. Developing a whole-of-government approach with a centralised strategy to facilitate delivery of net zero targets
The new government aims to make Britain a clean energy superpower, emphasising the UK's pledge to net zero emissions by 2050. They plan to enhance the country's energy efficiency by tapping into underutilised resources like long coastlines, high winds, skilled offshore workforce and advanced technologies.
Labour’s manifesto talks about restoring the phase-out date of 2030 for new cars powered by internal combustion engines (ICE) and supporting the transition to electric vehicles. These concerns were previously raised by IIGCC, PRI, and UKSIF when former Prime Minister Sunak announced delays in banning the sale of new fossil-fueled cars last September.
However, the manifesto lacks specifics on how sectors will transition, which is vital for building investors' confidence on how the country plans to decarbonise key sectors. It is particularly relevant for hard-to-abate sectors, where we hope to see more granularity from relevant government departments soon.
These efforts should be supported by a comprehensive economy-wide transition plan that reframes the UK’s Nationally Determined Contribution as a holistic strategy, clarifying sector-specific decarbonisation strategies to guide investors.
B. Devise a comprehensive green industrial strategy that supports the decarbonisation of the UK economy and boosts economic competitiveness
The Labour manifesto introduces a 'new industrial strategy' that includes allocating funding to green hydrogen, carbon capture and rebuilding the steel industry, with the ambition of creating 650,000 jobs by 2030.
The strategy reflects Labour’s commitment to an approach that leaves ‘no community behind’, signaling a just transition to a decarbonised economy by upskilling and retraining workers. It also plans to facilitate long-term investment through its Green Prosperity Plan, fostering partnerships with businesses through the National Wealth Fund.
Private finance must play a crucial role under the new government, especially as Labour has revised its green investment pledge from £28 billion per year to approximately £4 billion annually towards achieving net zero targets. As the cost of climate crisis grows, this shift further emphasises the need for creating a supportive policy environment and fostering partnerships with the private sector.
They have also proposed not issuing any new licenses for oil and gas, arguing that it would worsen the climate crisis and not improve energy security. This is a shift from the previous Conservative government, which faced backlash after issuing nearly 50 new licenses last year.
C. Increase the UK’s adaptation and resilience to growing climate impacts
Labour has recognised the importance of climate resilience, particularly in new homes, emphasising the need for proactive preparation to mitigate the impact of the climate crisis. However, the manifesto lacks specifics on identifying investment gaps for adaptation and reliance or the clear policy pathways the government intends to establish.
Notably, projected climate change damage to the UK’s GDP is expected to increase from 1.1% to 3.3% by 2050, with the greatest risk to the UK economy being large scale disruption to the global economic system.
D. Embed the delivery of a nature-positive transition into the UK policy framework
The manifesto has also highlighted the commitment to enhance nature conservation efforts and achieve the UK's Environment Act targets.
Additionally, the Labour Party aims to enforce water sector regulations to ensure that water companies clean up rivers, lakes, and coasts and support farmers through land-use frameworks and environment management schemes. This move reflects public pressure after a report published earlier this year stated that no waterway in England or Northern Ireland is in good overall health.
However, more is needed. The UK urgently needs nature-first policies, with a clear framework to attract finance for restoration, prioritising a people-first approach. The UK has some of the most depleted nature in Europe, so swift action and support of private finance is crucial.
E. Implement a supportive financial regulatory environment which facilitates capital flows towards climate and nature goals
Making the UK the green finance capital of the world is also on Labour's agenda. It has committed to mandating UK-regulated financial institutions – including banks, asset managers, pension funds, and insurers – and FTSE 100 companies to develop and implement credible transition plans that align with the 1.5°C goal of the Paris Agreement.
Notably, they also aim to advance plans for the long-delayed UK Green Taxonomy and implement sustainability disclosure requirements aligned with international standards and the TPT disclosure framework, which will provide businesses with certainty in complying with global net-zero reporting standards.
IIGCC notes that the manifesto lacks details on transition finance and ensuring global coherence, which is critical for investor confidence and operational effectiveness in achieving these ambitious goals.
Next up for the Labour government
As Starmer settles in, the new Cabinet will be appointed, with many of the 20 senior ministers appointed to run their departments. We could also see the restructuring of some government departments that are relevant to managing the future of climate policy.
For example, we could see a new Department of Energy and Climate Change (DECC 2.0) previously established by former Labour Prime Minister Gordon Brown in 2008, to replace the current Department of Energy Security and Net Zero (DESNZ).
As IIGCC’s Policy Director, Emily Murrell, said today: “The UK government’s approach to climate action is important far beyond its borders. If they seize the opportunity provided by a sizeable majority and get the UK back on track to deliver their climate targets, they stand to benefit from the enormous opportunities offered by the transition to a green economy. This would serve as a great example to other nations facing similar challenges and could be the perfect opportunity to rebuild the UK’s credibility on the world stage, from the G7, to annual climate COP summits and beyond, and plug the global climate leadership vacuum many have observed.”
Only time will tell whether the new Government can deliver on their ambitious climate agenda for Britain and the world.
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