“It is not five minutes to twelve, but one minute to twelve,” said Detlef van Vuuren, one of the Dutch scientists who collaborated on the latest report by the UN climate agency, the IPCC.
According to the report, presented on Monday, countries have to invest three to six times more than currently agreed in measures to reduce greenhouse gases. If that does not happen, the climate goals will be far out of reach. That is this week’s alarming message from the United Nations.
“The path to limiting global warming to 1.5 degrees is very narrow,” Van Vuuren told the Dutch financial daily FD. The IPCC reports are internationally considered to be the most important scientific source on which countries base their climate policies.
Costs of sustainable technologies down sharply
The report concludes that the costs of sustainable technologies have fallen much faster than scientists predicted in the past decade. For example, the costs of solar panels and batteries for electric cars have dropped by 85 percent and wind turbines are now 55 percent cheaper on average than in 2010. In many places in the world, electricity from sun and wind is now cheaper than electricity from fossil fuels like coal.
Despite this, scientists say much more effort and money is needed to keep global warming to 2 degrees. “There is enough capital available worldwide to close this gap in required investments. It requires sharp climate policies from governments,” said the IPCC.
Not only states, but also companies and financial service providers are under increasing pressure to do more. For example, consultant Profundo, which started assessing the climate policies of international banks 15 years ago, states that they continue to financially support the fossil sector. “We did this for banks in several countries, two of the first being Canada and the Netherlands,” said Jan Willem van Gelder, director of Profundo.
45% of bank disclosures insufficient
“Some things have changed since, but the one constant factor in these 15 years has been that banks discredited our calculations and assessments, claiming that NGO demands were unrealistic and that they were doing more than enough to mitigate climate change. And that bank regulators did not really pay attention to all our analyses,” said Van Gelder.
He points out, however, that since a few weeks circumstances have become more bleak. The European Central Bank, for instance, has published a critical report. Almost none of the banks are disclosing all the basic information on climate-related and environmental risks that the ECB has required.
“As much as 45 percent of the banks’ disclosures were even rated as insufficient, both in terms of content and substantiation,” Profundo said, referring to the ECB report.
“We end up with a lot of white noise and no real substance on what both markets and supervisors really want to know: how exposed is a bank to C&E risks,” ECB Board member Frank Elderson said last month.
The Finance & Climate Change influence map 2022, which was recently published, underlines the ECB’s criticism. ‘Financial institutions continue to show a significant lack of meaningful short-term action in the face of the climate crisis, despite an increase in long-term climate targets and voluntary climate-related reporting by these groups.”
All Gfanz members belong to opposing industry associations
According to the study, this is evidenced by the membership of industry associations to which these institutions are affiliated and which oppose attempts by policymakers to implement sustainable finance policies. It is also evidenced by the persistent and significant financing of fossil fuel value chains and the lack of short-term roadmaps for achieving their long-term goals.
Although 29 of the 30 financial groups assessed have set climate targets for 2050 in line with the Glasgow Financial Alliance for Net Zero initiative, or Gfanz, all 30 financial institutions remain members of financial industry associations that oppose emerging sustainable finance policies, including financial sector disclosure requirements in the EU and requirements to consider ESG as part of investment missions in the US.
In addition, 15 of the 30 banks are members of industry associations that have directly lobbied for fossil fuel interests, including the US Chamber of Commerce and the American Gas Association, the researchers said. A small number of financial institutions, especially BNP Paribas, AXA and Allianz, go against the trends and participate in sustainable finance policies with ambitious positions.
JP Morgan largest funder of fossil fuels
The 30 institutions assessed cumulatively enabled at least 740 billion dollars in primary financing for the fossil fuel production value chain in 2020 and 2021, representing 7 per cent of their total primary financing in this period.
This funding is in stark contrast to the science-based guidelines of the IPCC and the International Energy Agency (IEA), which make it clear that exploration and production of coal, oil and gas must be rapidly scaled back and global emissions halved by 2030. The largest funder of fossil fuels was J.P. Morgan with 81 billion dollars in 2020-2021.
This article originally appeared in Dutch on InvestmentOfficer.nl
Related articles on Investment Officer Luxembourg: