We're not out of the woods yet but governments are keen to set a new post-COVID green agenda. The UK government unveiled its plans yesterday backed by £12 billion. The devil is in the details and on private sector support. Below, responses from fund managers and free-market advocates.

Casting the UK as the new centre for green technology and finance, Boris Johnson yesterday unveiled a 10-point plan to get the country to net zero emissions by 2050 and on a new footing for decades of economic growth. Already stirring controversy is his ambitious plan to ban the sale of all petrol and diesel cars by 2030 and scale up nuclear power.

Into this green industrial vision the government said it will pour £12 billion of investment, and believes it will attract up to three times that from the private sector, with the goal of creating 250,000 UK green jobs. Before moving on to wealth manager's responses....

What is in the PM's 10-point plan?
1. — The UK will become the Saudi Arabia of wind with enough offshore capacity to power every home by 2030.
2. —  Provide up to £500 million in hydrogen investment.
3. — Take forward plans for new nuclear power, from large scale to small and advanced modular reactors.
4. — Invest around £2.8 billion in electric vehicles, including a network of charging points, and produce long-lasting batteries in UK gigafactories.
5. — Create cleaner public transport, including thousands of green buses and hundreds of miles of new cycle lanes.
6. — Look to repeat Jack Alcock and Teddie Brown’s first nonstop transatlantic flight a century ago, with a zero emission plane. And do the same with ships.
7. — Invest £1 billion in 2021 to make homes, schools and hospitals greener, and energy bills lower.
8. — Establish a carbon capture and storage industry, backed by £1 billion of government investment for clusters across the North, Wales and Scotland.
9. — Absorb carbon by planting 30,000 hectares of trees a year by 2025 and rewild 30,000 football pitches’ worth of countryside.
10. — Use £1 bllion energy innovation fund to commercialise new low-carbon technologies, such as the world’s first liquid air battery being developed in Trafford, and make the City of London the global centre for green finance through a sovereign bond, carbon offset markets, and disclosure requirements.  

The UK government isn’t alone in wanting to lead a post-COVID green recovery, but the fact remains that any government investment will need heavy backing from the private sector and individual investors to meet its targets.

While reactions were largely positive, Luke Davis, CEO of SME investment house IW Capital, said success hinges on private sector innovation and investment. "We've seen this already with the COVID vaccines coming through with private companies supporting university or public research programmes. When the private sector sees a challenge it can fix, it can be incredibly powerful."

Davis also noted that the announcement couldn’t have come at a better time when investors have never been more willing to do good with their capital. An increasing altruism, from funds and firms alike, should make it easier to back green tech or low carbon solutions, he said.

Randeep Somel, manager of the M&G Climate Solutions Fund, said Johnson's announcement amounted to the UK government "seeking to stimulate the economy, go green and address regional inequality all in one plan."

The government is striking at the main sources of CO2 in the economies; power generation, transportation, and building efficiency, he said. "Not only will these investments help the UK in reaching its Paris Climate deal commitments, they will provide stimulus to an economy that is still reeling from the COVID-19 pandemic."

Good news for UK regions
The government's plan singled out UK regions for investment that have been hard hit from dwindling manufacturing and present a clear way of delivering the levelling-up of election promises. Wales, the Midlands, the North East and parts of Scotland are all mentioned for investment, and all are areas that have unemployment rates higher than the national average.

Funding nuclear energy and green hydrogen will also continue to boost UK-based companies in critical regions, Somel said, naming Rolls Royce in Derby and ITM Power in Sheffield, as two examples.

"While critics may say the £4 billion allocated so far by the government is too small, it is a strong statement of intent and one that is likely to spur private sector investment many multiples of the announced government figure,” Somel added.

Mark Littlewood, director general of the free-market think tank the Institute of Economic Affairs, not surprisingly was more concerned with government getting in the way. He called the new green plan "ambitious" but also reliant on “the false assumption that the state is best placed to pick winners when it comes to technology and the future of energy."

“The measures announced largely rely on heavy-handed prohibitions – such as the ban on sales of petrol and diesel cars – rather than price incentives." In his view, the motor industry has shown that markets are far better at improving environmental outcomes than government mandates. "In response to price signals and customer demand, the engine technologies of today are far less polluting and far more efficient than those of yesteryear," he said.

Where governments have intervened, "they have often got it wrong. The diesel scandal being the most notable example."

He added that the government would do well to "adopt technology-neutral policies, rather than becoming spellbound by grand schemes with very low probabilities of success, such as HS2 and Hinkley Point."

Littlewood called the plan's decision to bring forward the ban on sales of new petrol and diesel cars from 2035 to 2030: “Yet another regressive, anti-motorist policy. The ban is not only authoritarian but is likely to impose huge costs on drivers: electric vehicles still only account for 7 per cent of new car sales in the UK, and are likely to remain far more expensive than their petrol and diesel counterparts." Also the "immense" cost of rolling out charging infrastructure across the country, including rural areas, would land on the taxpayer's lap.

His counterpart at the IEA, COO Andy Mayer, responding to the PM's pledge to introduce hundreds of miles of new cycles lanes, said that although well-designed cycle schemes "can be brilliant", they help only a small minority of commuters. "Many recent schemes have been poorly designed and introduced without proper scrutiny during the pandemic. It is vitally important that policymakers and planners consult the public, prioritise value for money and consider the unintended consequences, like gridlock that increases air pollution,' Mayer said.

These changes should be made cautiously, not ideologically, he said. "Westminster politicians would do well to remember that most parts of Britain are not London, and that most commuters still need to drive to work.”

Investors need to keep up with new era of green investment
Quilter Cheviot's director of responsible investment Gemma Woodward said the plan marked "a new era in government policy", where climate considerations trump all else, and a 2050 path to net zero should be the primary focus of all government departments.

Earlier this year, the EU launched the "European Green Deal", a €100 billion plan to transition the entire bloc to a clean circular economy. In regard to this and the EU’s sustainable finance action plan, Woodward said "a high bar has been set for the Chancellor’s green finance policy."

“For investors, these shifts in government and regulatory policy should act as a tailwind for companies and sectors that serve the ‘new economy’, and investors need to keep up," she said.

Richard Lum, co-chief investment officer at Victory Hill Capital, a specialist in global renewable energy infrastructure projects, also welcomed the announcement, but said it doesn't go far enough.

An energy transition thought through
"The pledge to quadruple offshore wind power in a decade is an admirable goal, but it is important the UK ensures the infrastructure to store and carry this power to our homes is put in place. The UK's electricity network requires investment as it was not originally designed to accommodate these modern, renewable sources of energy, nor store the extra capacity generated on particularly sunny or windy days."

He suggested that the government should address this issue "before grandiose plans are put in place to increase the amount of renewable energy being pumped into an ageing system. Likewise, the announced funding for nuclear power raises its own problems, particularly how we plan to handle and store masses of waste that will remain highly radioactive for thousands of years."

The UK is taking steps in the right direction, Lum said, "but all governments must take a realistic approach to the energy transition, not just on a country-by-country basis but by working with partners around the world."