Co-operative and Community Benefit Societies (Environmentally Sustainable Investment) Bill

Andrew Lewer Excerpts

2nd reading & 2nd reading: House of Commons
Friday 11th September 2020 Commons Chamber

[Andrew Lewer (Northampton South) (Con)]

I am glad to have the opportunity to contribute to the debate on this private Member’s Bill and, indeed, to follow its promoter, whom I congratulate on a carefully crafted speech, with much passion in it. There are obviously some things one could take issue with, too, not least the Government’s record on carbon in the economy. Indeed, concerns about the feasibility of current targets and their cost—especially for those on lower incomes—in an already coronavirus-battered economy are well worth raising.

As we have heard, the Bill in essence seeks to enable co-operative and community benefit societies to raise external investment capital for environmental and sustainable purposes. On the surface, that is a sensible suggestion, and in general terms I—and I am sure many colleagues—support some of the objectives that aims to achieve. I am sure that several of my colleagues will make further good and detailed points on the purpose and key provisions of the Bill, but I will give some thoughts as a starter.

I am standing in an unusual place for me, away from the customary 2017-2019 naughty corner, and speaking on this topic is out of my comfort zone as well, but, having looked into it, it is well worth unpacking in debate. Indeed, some interventions have already revealed that to be the case. Co-operatives and community benefit societies are great means of facilitating business with a mutual and social purpose, democratic ownership and governance. The Government have always been supportive of that ethos, changing the law in the Co-operative and Community Benefit Societies Act 2014 to reduce some of the legal complexities and cut red tape on how co-operatives operate. It is encouraging that, since then, the co-operative movement has continued to be successful, generating more than £130 billion of income each year for the UK economy and employing more than 230,000 individuals. I have a personal connection: my dad worked for the Co-op in Manchester and the family is a chapel and Methodist family.

It is important to point out that from day one the Government have had a major focus on climate change and encouraged support for many green industries and green initiatives. In fact, as many colleagues regularly mention, the UK was the first major economy to enshrine into law a commitment to hit net zero by 2050 and to introduce a landmark Environment Bill, which places environmental ambition and accountability at the heart of all Government policy and holds subsequent Governments to account if they fail to uphold their environmental duties. Just last year, the Government published a green finance strategy detailing how they intend to support green financial services, accelerate investments into the UK’s clean growth and encourage a clean global finance market.

A 42% reduction in carbon emissions has been achieved while simultaneously growing the economy by two thirds to the end of 2019, which is the strongest record in that regard among the G7. That trend has the potential to continue, with recent announcements from the Chancellor that the Government intend their rebuilding of the economy after coronavirus to include releasing £3 billion into green investment programmes and to jointly fund a £40 million venture capital fund for green start-up companies, to encourage a new generation of a clean and low-carbon technologies.

[Jerome Mayhew (Broadland) (Con)]

My hon. Friend mentions the very welcome reduction in carbon in the UK economy over the past 20 years. Some of that has been achieved by offshoring carbon emissions to third countries, which is then reimported. Does he agree that an effective way of dealing with that would be the introduction of carbon border adjustment payments?

[Andrew Lewer]

A more general answer to that extremely specific question is that it is important to have realistic goals and targets in country, so that those sorts of ways of trying to get around things are avoided. That is why commitment and passion need to be mixed with pragmatism and realism in seeking targets that are actually achievable.

[Steve Double (St Austell and Newquay) (Con)]

Before my hon. Friend moves on from that point, does the conversation that just took place not highlight the fact that there is little value in the UK reducing our carbon emissions to zero if we do not take other developed countries around the world with us? This is a global problem, and the UK eradicating carbon emissions in isolation from everyone else will have little impact globally.

[Andrew Lewer]

That does indeed highlight the importance of leading by example, so long as that example is a significant carbon reduction coupled with a successful economy, rather than wholesale carbon reduction done in a way that leads to economic problems, which would lead to other countries deciding not to follow the example for obvious reasons.

[Anna McMorrin]

The hon. Gentleman is making a good speech, but does he not agree that the Bill actually does what he describes? It builds in the opportunity to build renewable or sustainable environmentally friendly projects across the board from the ground up. Sustainability covers a wide area in Wales, as defined by the Well-being of Future Generations (Wales) Act 2015.

--- Later in debate ---

[Andrew Lewer]

The hon. Lady will be pleased to hear that I will say several things in support of the principles underlined by her and which other colleagues have touched on.

While the Bill seeks to add to the track record of this Government and previous Governments, there are several issues within it that that cannot be ignored. Some of those worry me, and although I see elements of merit in the Bill, I am hesitant about it for reasons that I will address, dealing with some of the specifics rather than only outlining problems overall for the sector, which may lead to the Minister’s scribbling out too much of his speech.

As I mentioned, co-operatives and community benefit societies add to the diverse make-up of the UK economy and are in many cases successful, with more than 72% of co-ops still flourishing after a difficult first few years, in comparison to 43% of companies overall. Those businesses are therefore a cornerstone of the UK’s economy, particularly its social economy, and have the benefit of helping to push sustainable economic development and investment in green sectors. That should be celebrated and encouraged. Many across the House will share their ambition.

[Kevin Hollinrake]

My hon. Friend outlines some of the benefits of co-operatives. Is he aware that in many countries the banking sector is largely provided through co-operatives, including Germany and the USA, and that those banks provide much more sustainable long-term thinking and patient capital to help small and medium-sized enterprises through financial crises? If the Government decide to lead us down that route in terms of diversifying our banking sector, would he support that?

[Andrew Lewer]

I think that business models that are rooted in their communities and have the wellbeing of those communities at their heart, while enabling individuals to be enterprising within them, are very beneficial, particularly in having the value of local knowledge of what will be a success, rather than simply a balance-sheet approach.

Investment in emerging green markets and technologies, in line with Government green investment strategies, can be beneficial and should be encouraged, but they are not without their own risks, and that is one of my worries. Investors must be aware that there are risks associated with green shares, as there are with any shares. My worry—and that, I believe, of some of my colleagues—is that the well-intentioned ethical ambitions attached to this instrument may expose them to risks that they may not have foreseen. I am concerned that the Bill exposes the co-operative sector to the unintended risks of being exploited as investment vehicles, rather than purpose-driven organisations. There is a balance to be struck there.

As with many of these societies and co-operatives, people have saved up for years to invest their savings in capital, and I want to ensure that they do not underestimate the associated risks of green shares proposed by the Bill. Just because it has the word “green” attached to it does not mean that it is a guaranteed way of making money or is a sensible investment. Although it is probably a slightly politically incorrect cross-reference in the context of this debate, I am reminded of the car industry. People often muse, “If only I’d invested massively in the car industry in 1900, I’d have made a fortune.” Actually, nearly all the car companies that were founded in 1900 led to a loss for their founders, because only a few of them prevailed. Although the overall concept of investing in the automotive industry in 1900 was good, it actually led to a lot of people losing a lot of money.

[Chris Green (Bolton West) (Con)]

Does my hon. Friend share my concern about the labelling of something as green? We might think particularly about electric cars. We have to be aware that when mining and other processes take place for the batteries and other components in an electric car they can in no way be seen as environmentally friendly or green, even though the car is labelled as such.

[Andrew Lewer]

That is absolutely true. Although, of course, there are some things that are labelled green in which I have complete confidence, others cause serious concern for the reasons outlined.

[Steve Double]

My hon. Friend is being very generous. I cannot miss this opportunity to highlight the potential of lithium extraction in Cornwall being linked to geothermal energy, which will in itself be totally sustainable and carbon neutral. These are the ways in which the UK is leading the world in green technologies, which will help the UK to be a world leader in these things.

[Andrew Lewer]

My hon. Friend’s commitment to his constituency and to this particular area is well known, and that was a well-chosen opportunity.

Another of my worries is that the Bill does not achieve what it sets out to. There are concerns that it could reduce the ability of co-operatives and community benefit societies to invest in green sectors. In its current form, the Bill would restrict rather than extend societies’ potential to take on mission-aligned investments for environmental purposes. If the intention is for more societies to raise more capital for environmentally beneficial activities, the legislation should provide capital-raising options that are useful for many societies in many contexts, rather than the limited number of circumstances to which the Bill limits it.

I am also aware of concerns that green shares—the main aim of the Bill—might unintentionally create a capital instrument with similarities to a mini bond, as has already been touched upon. That is something else that causes some difficulties. When Her Majesty’s Treasury’s review into regulatory arrangements, which includes mini bonds, is completed, the Government will need to carefully consider its findings before passing legislation that would in essence create capital instruments with similarities to those mini bonds.

Having been drawn in two Prime Minister’s Question Times in a row—this week and last week—and been drawn first for both private Members’ Bills today, I will not push my recent considerable luck any further, Madam Deputy Speaker, and will conclude. I am persuaded that the proper and right way to push towards the development of further green financial instruments is through a full consultation, which would give all parts of the sector a chance to put their views and the Government the chance to listen before considering introducing similar draft legislation. In some respects, I support the main ambition of the Bill, as do many of my colleagues, but in its current form, without extensive engagement with the sector, and for the reasons outlined in my speech and in some of the interventions, there remain some unanswered questions.