Finance and corporates
Financial institutions and large corporations make substantial profits from fossil fuel companies. At the same time, they hold considerable influence over fossil fuel companies. Sectors like manufacturing, transport, and logistics are some of the biggest consumers of energy. Moreover, they can use their hefty purchasing power to prioritise suppliers with sustainable business practices. Collectively, financial institutions and investors play a pivotal role in providing the capital and support necessary for fossil fuel exploration, production, and distribution. This support is channelled through various means, including loans, share purchases, and insurance. The withdrawal of this backing can severely undercut fossil fuel companies’ ability to raise capital. This can impede their capacity to sustain their damaging operations.
Profiting from destruction
Fossil fuel companies survive because they don’t pay the financial costs for the health and environmental damage they inflict. Additionally, they don’t bear the costs of extreme weather events resulting from climate change caused by their activities. At the same time, they enjoy generous government subsidies and have made bumper profits from Europe’s energy crisis at the expense of ordinary people. Every cent of support for these companies makes people poorer, sicker, and less safe. Additionally, it shrinks the amount of finance available to scale up the renewable energy solutions that we need.
Reputational risk
Thankfully times are changing. Gradually, the financial institutions that support fossil fuel companies are realising that they are not only risking their reputation with these investments, but also their money. Large corporations too are increasingly aware that their consumers expect them to clean up their supply chains and operations. They have various options for doing so. For instance, installing renewable energy solutions on-site or upgrading the energy efficiency of their infrastructure and operations. Additionally, they can sign corporate power purchase agreements with suppliers of renewable energy.
Withdrawing support
Financial institutions and large corporations have a responsibility to propel the fossil fuel companies they do business with towards a rapid and just energy transition that includes commitments to close (not sell) coal plants by 2030, and fossil gas plants by 2035. Unfortunately, lots of fossil fuel companies either flat-out refuse or make green sounding commitments on paper that do not deliver in the real world. In both instances it is essential that those that do business with them withdraw their support.
Shared responsibility
Now is the time for those who have financed climate breakdown and engage in unsustainable business practices to take responsibility for the multiple crises they’ve helped get us into, and do their fair share to get us out. Financial institutions, investors, and corporations have a responsibility to mobilise every euro, industrial capability, and measure of influence to deliver intelligent energy savings, and massive renewable power rollouts and electrification programmes, starting now. Every heat pump, insulated house, solar panel and wind turbine protects people from fossil fuel shocks, promotes and enables peace, and permanently reduces living costs.
For banks to be credible in supporting the energy transition, investing more in sustainable energy supply ought to be coupled with the following:
• They must restrict any financing for coal and fossil gas to companies that have committed to a coal and fossil gas phase-out (for coal by 2030 in the OECD and 2040 worldwide; for fossil gas by 2035 in the OECD and 2040 worldwide).
• They must immediately end their support for fossil fuel expansion – to limit global warming to 1.5°C, it is critical that no new upstream project be developed.
Why a 6:1 sustainable power supply to fossil fuel financing ratio? Read here >>