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

Chris Green Excerpts

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

[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.

--- Later in debate ---

[Chris Green (Bolton West) (Con)]

It is an absolute pleasure to follow my hon. Friend the Member for Rushcliffe (Ruth Edwards), who made the important point that we need to have more than just good intentions in what we are doing. I think that the hon. Member for Cardiff North (Anna McMorrin), who secured this debate on this Co-operative and Community Benefit Societies (Environmentally Sustainable Investment) Bill, is going way beyond good intentions. However, I also reflect on the words of my hon. Friend the Member for Christchurch (Sir Christopher Chope), who is still in the Chamber. I think there is significant scope for a coalition, or for work to be taken forward, to bring this back in another form. Much that has been said, by so many colleagues, captures the spirit, intent, ideas and values of the co-operative and community benefit societies. These are values that I think we all share right across the House.

There is a significant focus in the Bill on dealing with the global warming and climate change agenda, which is incredibly important. We only have to see the protests outside to realise how many people are engaged in that, both here in London and across the country. This is therefore an important area that we need to look at, to see how we can support funding and investment in the sector, as well as supporting societies and co-operatives.

One of my concerns with the Bill at present is how we define and understand environmentally sustainable investment. No doubt guidance will be provided at the beginning, but many organisations around the country will draw their own conclusions, think their own way and draw up their own plans. In many ways that is what we would want to happen, because that is the nature of those organisations, but an incredibly broad range of organisations could be included or excluded. For example, I would generally expect many environmental organisations to be 100% against the nuclear industry. However, nuclear is a zero-carbon source of energy, so excluding this important sector from such investment would be problematic.

Let me touch on a couple of other issues. One of the things we want in these mutual organisations—these societies—is cohesion. They ought to be able to work together. What divisions will we create if we bring too many difficult and contentious issues into them?

I reflect on an issue from the United States of America. The US has seen a significant reduction in its carbon emissions. At the same time, because of the reduction in the cost of energy, we have seen significant reshoring of industry from countries around the world to the United States, creating manufacturing jobs there. We would all want more of that here in the United Kingdom, but that was achieved in the US in part because of the fracking industry.

Fracking is a very controversial technology—a very controversial source of energy—in the United Kingdom. In fact, it is very controversial in the United States of America, where it is happening and it has achieved those results. We ought to be very careful about that, or we could see arguments in mutual societies, with some saying, “We ought to be investing in hydraulic fracturing,” and others making robust arguments against it. We must be very careful about how we define and understand the motivation in this area and on this agenda.

Let me take another example. I quote from the Bill itself:

“The environmental sustainability goals are—

(a) to create an innovative, productive and low carbon society which recognises the limits of the global environment and therefore uses resources efficiently and proportionately (including acting on climate change); and

(b) to maintain and enhance a biodiverse natural environment with healthy functioning ecosystems that support social, economic and ecological resilience and the capacity to adapt to change”.

I think that we can all agree with the values behind that. There is so much agreement in society and industry more broadly; we have only to look at BP, or pretty much any corporate organisation with a corporate responsibility statement. I have here one such statement from BP. No doubt, there are many other things that BP would say, but it states:

“Our purpose is reimagining energy for people and our planet. We want to help the world reach net zero and improve people’s lives.

We will aim to dramatically reduce carbon in our operations and in our production, and grow new low carbon businesses, products and services.

We will advocate for fundamental and rapid progress towards Paris and strive to be a leader in transparency.

We know we don’t have all the answers and will listen and work with others.

We want to be an energy company with purpose; one that is trusted by society, valued by shareholders and motivating for everyone who works at bp.

We believe we have the experience and expertise, the relationships and the reach, the skill and the will, to do this.”

On my reading of what is in the Bill and of where BP and many other organisations stand, I see significant compatibility between the two. I therefore look for clarification on whether the nuclear industry, the fracking industry and big oil ought to be included in the scope of the mutual organisations and societies covered by the Bill. At the moment, on my reading, all those organisations would be included, but I feel that that is not the intention.

[Marco Longhi (Dudley North) (Con)]

Does my hon. Friend agree that some of the plethora of green investment opportunities may have unintended consequences and that the Bill does not contain a strategic framework for risk-assessing these investments and therefore informing investment decision making?

[Chris Green]

That is an excellent point. This debate has been very well informed on both sides of the House; we have heard my hon. Friend the Member for Clwyd South (Simon Baynes) and others use their expertise in highlighting their concerns. I think that means that the Bill ought to come back in one form or another. I think that so many people want it to come back because there is so much progress that we can make in this area.

Let me touch on a second aspect. As we see climate change and the activism that goes with it reach the peak of our political agenda—it has been there for a long time and we have no expectation that it will leave the agenda in the near future—we must be concerned to some degree about how political activism can impact mutual societies, co-ops and other membership organisations. I was alerted by what my hon. Friend the Member for Berwickshire, Roxburgh and Selkirk (John Lamont) said. In fact, he was highlighting a point about the protection of these organisations, because he would not want an outside player to invest a significant sum and have a proportionate voice according to how much they are investing in the organisation.

This is about keeping the community voice just as relevant. The flip side of that is that if there is one-vote per investment, that lends itself to political activism. With a small investment, someone can have a significantly disproportionate say in the organisation. We all appreciate that many people involved in different organisations, of all sorts, are not politically active or politically engaged all the time; they make an investment and they want to leave it alone, and they want other people to make these decisions. So where an activist organisation is engaging and making these investments, they might be able to skew the views and values of the mutual organisation. We ought to be cautious about this and very much aware of it.

[Ben Everitt]

I wish just to underline the point my hon. Friend is making about shareholder activism. Does he agree that the mechanism in respect of the demutualisation of any funds, should it be subject to shareholder activism, is dangerous in this context?

[Chris Green]

I agree entirely; if this were a mechanism or route to demutualisation, that would be fundamentally against the views of these organisations as they are at the moment—they could change in the future—and against the views and values of the hon. Member for Cardiff North.

We have heard really positive contributions from colleagues from right across the House. When I look at the Members who are supporting the Bill, I see that it is a distinguished group, which includes someone who is now a Minister. I am sure that the hon. Lady will therefore get a great deal of support in the future in her aims.

[Paul Howell (Sedgefield) (Con)]

It is a pleasure to speak in this debate on the Bill put forward by the hon. Member for Cardiff North (Anna McMorrin). As an accountant by profession, having spent my previous career in manufacturing businesses in and around Sedgefield, I am still in awe of the detailed discussion that has been brought to this debate, particularly by my hon. Friends the Members for Grantham and Stamford (Gareth Davies) and for Clwyd South (Simon Baynes), and I shall pick up later on one of the points made by the latter.

Before looking to speak on this Bill, I had to clarify for myself what a “co-operative and community benefit society” is and what an “environmentally sustainable investment” is. A co-operative society is run for the mutual benefit of members who use its services. This is based on the common economic, social and cultural needs, or interests, of the members. A community benefit society is run primarily for the benefit of the community at large, rather than just for the members of the society, which means it must have an overarching community purpose that reaches beyond its membership. One type of co-operative is a credit union, and I am concerned about the unintended impact of this measure on the users of these credit unions.

A credit union is a co-operative bank that is owned and managed by its members, all of whom have accounts in the bank. Like banks, credit unions accept deposits and make loans, but, as member-owned institutions, credit unions focus on providing a safe place to save and borrow, at reasonable rates. I have visited a number of them, including the NE First Credit Union service point at the leisure centre at Newton Aycliffe, in the north-east, and I strongly encourage people to use its services before buying on any high-interest hire purchase scheme, as that normally results in substantially higher costs being paid. Such services are a real alternative to the exploitative payday loans and high-interest rent-to-own payment systems most commonly used for household good such as fridges and washing machines.

With a rent-to-own scheme people get the product straightaway, and then make weekly, fortnightly or monthly payments, plus interest; insurance or warranty policies are often included in with the item. The interest to be paid on rent-to-own agreements will now be limited to no more than the cost of the product. Therefore, someone who buys a fridge from an RTO company for £250 will pay no more than £500 in total, and interest and other RTO charges will be benchmarked against mainstream retailers and the cost of living. That still means, however, that someone’s fridge that costs £250 will cost them another £250 in interest. With a credit union, the interest is more likely to be around £50. We want opportunities for credit unions to develop, but they must be safe havens with little risk, because the people who save with them are likely to have little alternate capital.

[Chris Green]

I learned recently from a local credit union that although many people know they are there to borrow money from, if more people recognised that they could also deposit money there safely and securely, that would provide far more opportunity for people to borrow products.

[Paul Howell]

I agree with my hon. Friend. Credit unions are also the place where people first start saving, and they are regularly a first step for people getting out of high-finance debt traps. Security is paramount, because people must have confidence that when they put their money in, it will not be at any risk. It would be particularly concerning for those investing if the laudable aims of ethical ambitions resulted in those ambitions overriding the security of the investment.

In the 2020 Budget, the Chancellor announced that the Government would bring forward legislation to allow credit unions to offer a wider range of products and services. That will support credit unions to continue to grow sustainably in the longer term and to play a pivotal role in financial inclusion. In a speech to the Association of British Credit Unions in March this year, the Economic Secretary to the Treasury said:

“I am delighted to confirm that this week’s Budget included the announcement that the Government is to bring forward legislation to amend the Credit Unions Act. This will permit credit unions to offer a wider range of products and services than ever before…helping you better meet the needs of existing members.”