What does a Liz Truss government mean for the green agenda?

Liz Truss, the UK’s fourth Prime Minister in six years, has stepped in at a critical time when the country needs stability. War in Europe, a cost-of-living crisis and the threat of a recession are just some of the challenges for Truss to contend with.

While these issues have all grabbed the headlines recently, the climate emergency continues to bubble away under the surface. In July, the UK government’s net-zero carbon emissions strategy was ruled unlawful as it didn’t explain how targets would be met, breaching obligations under the Climate Change Act 2008.

But is Truss committed to achieving net zero and facing the climate emergency? Here’s a closer look at her cabinet’s green credentials and what this could mean for responsible investors.

This article isn’t personal advice. If you’re not sure whether an investment is right for you, ask for financial advice.

Concerns over Truss’ green credentials?

Truss has served in numerous cabinet roles including environment secretary and most recently foreign secretary. Throughout her campaign, she’s concerned environmentalists with her statements on fossil fuels and renewables. She’s favoured ramping up oil & gas drilling and fracking to strengthen the UK’s energy security, while vowing to stop fields being filled with “paraphernalia” like solar farms.

However, her personal views remain unclear. Truss stated she “was an environmentalist before it was fashionable”. She’s claimed to build on the Conservative party’s green record by doubling down on the 2050 net-zero drive in her green manifesto to the Conservative Environment Network.

Since stepping into office, she’s replaced Boris Johnson loyalists with her own allies and some environmental campaigners have looked at her cabinet choices with some trepidation.

Cabinet reshuffle

Jacob Rees-Mogg was appointed Secretary of State for Business, Energy and Industrial Strategy. It puts him in charge of navigating the UK’s climate and energy strategy, which includes the plan to reach net zero.

Many saw this as controversial as he’s previously dismissed climate science as “alarmism”. Rees-Mogg thinks “every last drop” of oil and gas should be extracted from the North Sea, and that “2050 is a long way off – we’re not trying to reach net zero tomorrow”.

Matthew Sinclair, who will run the No 10 economic unit, is an outspoken free-marketeer who has argued for climate commitments to be ditched. In 2011, he published the book ‘Let Them Eat Carbon’. He stated global heating could bring benefits and ”draconian regulations curbing emissions will cost more jobs than they create”.

While some questions have been raised about the cabinet reshuffle, there have been appointments with more positive prospects for the green agenda.

Graham Stuart is stepping in as Minister of State for Climate. Stuart was one of the leading voices urging Theresa May to legislate the net-zero target. He’s also long been involved in the Globe group of legislators who push for laws mandating climate action to be passed by national parliaments.

The previous Secretary of State at the Department of Business, Energy and Industrial Strategy, Kwasi Kwarteng has been appointed as the new Chancellor of the Exchequer. He’s been seen as extremely supportive of renewables and has previously argued against a return to fracking.

What green policies are on the table?

Truss has reaffirmed her support for the UK's 2050 net-zero goal, in particular by focusing on insulating homes, offshore wind and rooftop solar capacity. She sees increasing the energy efficiency of homes as a key long-term solution to rising energy prices.

She’s also pledged to speed up deployment of clean and renewable technologies including hydrogen, solar, carbon capture and storage, and wind.

Alongside this, the prime minister announced the launch of a new government body, called Great British Nuclear, which will bring forward new nuclear projects, backed by substantial funding. It’s thought Great British Nuclear will help nuclear energy generate around a quarter of our electricity by 2050. The goal is to make the UK a net energy exporter by 2040.

However, there’s ongoing debate about whether nuclear energy can be classed as ‘clean’ energy. Nuclear could contribute to low-carbon energy supply. But there are operational risks, unresolved waste management issues, nuclear weapon proliferation concerns, and adverse public opinion.

Truss is also implementing a cap that will freeze the average UK energy bill at £2,500 for the next two years. This won’t be funded by a windfall tax, as suggested by Labour, because Truss believes this would discourage investment into energy supplies.

The prime minister announced the suspension of green levies, which make up around 8% of household energy bills. This portion of energy bills goes towards improving the energy efficiency of homes and businesses by improving insulation, as well as funding research into renewables.

As part of the new energy strategy, the government will be awarding around 100 new oil & gas licences in the North Sea. Truss is also looking to lift the ban on fracking.

To address the energy crisis, we need to deploy renewables. That’s because the relatively small amount of oil & gas we’ll extract from the North Sea and fracking won’t be significant enough to bring bills down. Onshore wind and solar can often be deployed faster and cheaper than fossil fuel extraction.

What does this mean for investors?

It will take time before we see whether Truss can deliver what she promised. But the longer serious climate action takes, the more severe the policy response will have to be if the UK is to meet its net-zero target by 2050.

This policy response will impact all companies. So, it’s important investors understand the risks by knowing how the businesses they invest in operate and how they are approaching climate challenges. Also how they intend to adapt to a net zero future.

Investors could also consider climate opportunities by investing in companies that are directly assisting in the transition to renewables. It’s important to regularly review investments to make sure they still meet your objectives and attitude to risk.

If you want to learn more about responsible investing, see the responsible investment section of our website. It includes helpful tips and tricks to investment ideas to help you get started investing responsibly.

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