John McDonnell has confirmed Labour plans to delist from the London Stock Exchange any company that “fails” to address the climate change crisis.

In a speech to City leaders and hosted by lobbying group UK Finance, the shadow chancellor said that regulation was necessary to “divert investment away from fossil fuels”.

This effort required legislation to ensure that companies could be stripped of their London listings if necessary, he added.

“This means that when we delist companies that fail to meet environmental criteria from the London Stock Exchange, investors can be confident that their money is not going on making the world uninhabitable for their children,” Mr McDonnell said.

The effort is one among a host of policies that Labour has branded its “Green Industrial Revolution”. They will help to address climate change but also “go some way in addressing - if not redressing - historical injustices” by making new green tech free or cheap for less wealthy countries, the shadow chancellor said.

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Mr McDonnell revealed that a review of the entire financial system will be carried out to see how each sector is responding to the “climate emergency”. This will include a full gamut of City institutions from hedge funds to asset managers, and commercial banks. A report will be produced by October this year, and experts involved in the review include former head of the civil service, Lord Kerslake.

Only the post-war Atlee government had made such a bold effort to reconstruct the UK economy, Mr McDonnell said, adding that Labour’s plans shared a spirit of an “active interventionist state”.

There would also be a Sustainable Investment Board that will have “responsibility” over whether the Bank of England prevents money “flowing to projects that will kill the planet or destabilise our economy”.

According to Mr McDonnell this body would oversee controversial plans for the Bank to be given a 3pc productivity target, alongside its mandate to ensure price stability by keeping inflation close to 2pc.

The board would connect government to the Bank, by “bringing together the role of Chancellor, Business Secretary and Bank of England Governor”.

The plans to tie together government and the central bank come despite fears about the Bank’s lack of tools to address productivity. Productivity, or the amount a worker produces per hour, is a key metric of inflation-free growth and therefore prosperity in an economy.

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The UK has performed very poorly on this measure in recent years, with productivity growth falling by 0.2pc in the first three months of the year, compared to the same period in 2018.

However, Labour’s plans to introduce a target for the Bank of England to improve growth in this area have been met with wide criticism. Economists labelled the move “absurd” and “crazy”, while governor Mark Carney said the Bank “wouldn’t have the tools” to address such a target.

The plans from Labour come after Mr Carney unveiled a report that examined how the institution can police the risks posed to the financial system by climate change.

A new “stress test” will be developed this autumn and put into practice in 2021, Mr Carney said.

It will “reveal the UK financial system’s ability to withstand the financial risks from climate change that arise from the increased frequency of weather events and from the transition to a carbon-neutral emission economy”, he added.