The head of one of the UK’s major political parties has proposed an immediate ban on all new listings of fossil fuel companies on the London Stock Exchange and a halt on the issuance of bonds that could be used to fund oil and gas exploration.
Liberal Democrats Leader Ed Davey said the moves would put teeth behind the UK’s commitment to tackling greenhouse gas emissions in the months leading up to November’s COP26 climate meeting in Glasgow, as reported by the UK’s Guardian news organisation.
Putting pressure on the financial system to divest from fossil fuels would be more effective than government emissions-reduction targets, Davey told the newspaper.
“The reality is that no matter how much governments spend, it’s going to be totally dwarfed by the amounts banks, private equity and hedge funds invest every day,” he said.
“So, if you’re going to really take on climate change, you’ve got to get that private capital to switch from dirty into clean. And this is a fundamental role for Britain in global leadership on climate change.”
In calling for a ban on new oil and gas listings, the proposal goes further than the party’s 2019 manifesto, which calls on the finance sector to steer resources away from “climate-negative activities” and “investments that may become stranded assets” such as support for new oil and gas fields “which cannot operate in the long term... if the net zero target is to be met”.
Davey said the policy would protect investors and pension funds from what he called a “massive lie” being perpetrated by powerful financial interests in the City of London, fossil fuel companies and the UK’s incumbent Conservative government.
“The lie is these investments are safe,” he told the Guardian.
“They are not safe. If the City of London doesn’t take this seriously, it’s risking its own future.”
The Liberal Democrats have very limited influence in the current UK parliament and it is unclear whether the government has the authority to ban an entire category of businesses from UK stock exchanges.
Davey told Upstream: "Fossil fuel exploration needs to come to an end if we are serious about tackling climate change. So as we head towards a net zero economy, investments being made in the City must reflect that reality. We cannot risk bad investments into stranded assets that lead to problems in the future.
"Oil and gas companies have a key role to play in the transition, whether that's investing in new renewables or helping us find new ways to heat our homes.
“And we have to protect investors from increasingly risky offerings. Fossil fuel equity offerings are losing investors billions but prospectuses are failing to explain these risks and regulators are failing to act.
"So we cannot pretend that business as usual can continue. Liberal Democrats believe that if we are to achieve net-zero, investments in companies whose primary aim is to extract more oil and gas have to end."
In the Guardian report, Davey singled out UK-based independent Neptune Energy, which is considering an initial public offering that could be worth a reported £5.5 billion to £7 billion ($7.6 billion to $9.6 billion).
The private equity-backed company has said a market flotation is one of several strategic options it is exploring, with chief executive Jim House telling Upstream this month that Neptune is in no rush to go public.
“We're patient, we're looking at it,” House said of a potential IPO.
“We're taking stock of all the different elements that are affecting markets and investor sentiment.”
A Neptune spokesperson told Upstream: “The carbon intensity of our operated production is less than a third of the industry average — and in the UK is world leading.
“Our lower carbon portfolio and ambitious carbon and methane intensity reduction targets are the foundation from which we are progressing opportunities with CCS [carbon capture and storage], hydrogen and electrification.”
This article has been updated to include a statement from Liberal Democrat Leader Ed Davey.