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The Big Idea
Money. It makes the world (and the fossil fuel industry) go round. In fact, investors own climate change because they own the fossil fuel system.
So how do we, as normal citizens, get global finance out of bed with the fossil fuel industry?
It might sound nigh on impossible but we do have the power to make big oil go bust.
Mark Campanale, the founder of non-profit think tank, Carbon Tracker Initiative, joins the dots between finance and climate change, why investors and banks own climate change because they own the fossil fuel system, and how you can use your own money (bank account, pension, insurance policies) to drive change.
What do climate change and finance have to do with one another?
Put simply, climate change is about burning fossil fuels. Who burns those fossil fuels? Corporations like BP and Shell.
Those two companies pay 20% of all the dividends paid to pension funds in the UK.
Wait, you lost me at “dividends.”
A dividend is the distribution of a company’s earnings to its shareholders. Shareholders own shares in a company.
When someone buys a share in a company, they become one of its owners: a shareholder.
Imagine a company is a big cake and all the shareholders own slivers of the cake.
So when a company does really well, shareholders get money back from the company’s earnings.
Back to pensions. Most of us have a pension, even if we don’t keep track of it. In the UK, people over 22 earning more than £10,000 a year are automatically enrolled. Companies that manage the money you keep in your pensions (called pension providers) use that money to invest on your behalf. The aim of investing money in a pension is to help grow the money into a larger amount, which can have a big impact on how much you’ll have available when you retire.
But most people don’t know where their pension is being invested. In the words of film director Richard Curtis, who co-founded the Make My Money Matter project: “I didn’t even know [my pension] was invested. I think I thought it was in a vault, growing like moss, and there’d be a bit more there when it came out.”
It almost defies belief but that collective pension money (which racks up to about £2.6 trillion) is currently going to finance the fossil fuel sector. Those pension providers are pouring money into companies like BP and Shell. Why? Well, because they’re really lucrative. Just look at how well BP has done throughout the cost of living crisis.
But pension providers aren’t the only ones investing in these companies. BlackRock, Inc. (the world’s largest investment management firm) and Fisher Investments (a private investment management firm) are also big-hitters when it comes to investing in the fossil fuel industry.
“Investors own climate change because they own the fossil fuel system.”
Mark Campanale
London is a global financial centre for the fossil fuel industry.
Around 15% of the world’s future emissions are going to come from companies listed on the London Stock Exchange.
“London isn’t ashamed of the fact that it’s the leading financier of coal, and oil and gas. It’s something that celebrates London has historically been a centre for mining finance, and companies raising money to fund the fossil fuel industry through London all the time,” Mark shares.
Why aren’t people angry about this and making change?
Well, wait a minute, because although global finance is a behemoth, people are making change.
The fossil fuel divestment movement (that’s the opposite of investment, by the way) is the fastest-growing divestment campaign in history. The campaign asks institutions to move their money out of oil, coal and gas companies for both moral and financial reasons. These institutions include universities, religious institutions, pension funds, local authorities and charitable foundations.
The divest invest movement — started by students — has managed to get 1,508 organisations to divest from oil and gas totalling around $40.4 trillion in assets. That’s as if the entire economies of China and the United States pledged to divest.
And it’s having an impact. Fossil fuel companies may remain rich and powerful for now but the campaign has hurt them. Public opinion of fossil fuel use has plummeted and for the first time a majority of the US candidates for president refused to take fossil fuel money.
“[This movement] is a recognition that there is this fundamental link between the financial system and the fossil fuel system. The biggest banks in the world: JP Morgan, Citigroup, HSBC and Barclays are huge funders of the fossil fuel system.”
Mark Campanale
Aren’t we investing in renewables too?
The divest invest movement might have made a dent but it’s still not enough.
“The disappointing reality is that something between just 3-4% of the capital expenditure of the world’s largest oil and gas companies is going into renewables.”
Mark Campanale
So when you see BP and Shell advertising their latest sustainability claims or investments into renewables, you know what that smell is? It’s the smell of greenwashing. In Mark’s words: “It ain’t quick enough, it ain’t big enough.”
95% of the renewable energy capacity in the world today is being built by renewable energy companies, not reformed fossil fuel giants.
The good news? The renewable energy industry is growing at about 20% every year. That rate of growth means that in just 6 years, we’ll have enough energy for about 40% of the world’s energy.
“In a decade or two, we will have built enough renewable energy to be the equivalent of all the coal and gas fired power that we’ve built in the last 100 years.”
Mark Campanale
What’s more, the UK has the potential to be a global leader in this space (we’ve got a lot of wind to spare, after all).
The bad maths of the fossil fuel industry
In her TED Countdown talk, Tzeoporah Berman says: “Every oil company wants to be the last company to extract the last barrel of oil from the ground.” Something she also backed up during her appearance on the Climate Curious podcast, ‘Why fossil fuels are the new weapons of mass destruction’.
Fossil fuel companies do not want to disrupt the way they operate. So how do we stop them?
When Mark founded the non-profit think tank, Carbon Tracker Initiative, it was based on the idea of finding how many coal companies are trying to raise money, how many are there, and how many more can develop their reserves before we tip over these climate thresholds? Most importantly though was answering this question: How much CO2 can be in the atmosphere, before we go over 1.5 degrees Celsius of warming?
The short answer is this: we have already extracted more fossil fuels from the ground than we have the budget to burn if we are to stay under 1.5 degrees of global warming.
“We’ve got around seven or eight years left before we break through the conditions associated with 1.5 degrees. Which begs the question: Why are investors pouring literally hundreds of billions of dollars a year into finding more? It doesn’t make any sense.”
Mark Campanale
In fact, we’re well on our way to beyond 2 degrees, which will be catastrophic.
Tell me some good news, quick.
It’s simple really: “We’re the first generation in human history to do these things: cooking, heating, generating power, and moving ourselves around without having to burn anything,” Mark tells us.
Renewable energy is already much cheaper than burning fossil fuels and it could get even cheaper because the more we build, the cheaper they get.
This is the promise of wind and solar: “Once you’ve paid off the cost of your solar and your wind, the cost of your energy is essentially going to be zero.”
Your homework this week to make big oil go bust.
- Green Your Pension
You can either switch your pension to one that is already making green investment decisions or call on your current pension provider to commit to net zero and to invest in climate solutions, instead of sectors that actively harm the planet.
There are several steps in that process. But it starts with finding out who your pension provider is, and then taking action like emailing your employer telling them you expect a green pension (Make My Money Matter have an email template) or speaking to your financial advisor about your options if you have a self-invested pension (which you may if you are self-employed, for example).
The Good With Money website, which offers advice on how to ensure your money is invested in ethical ways, has listed the six most ethical pension providers for this year, as a place to start.
2. Switch to a Greener Bank
While banks haven’t always had the best reputations, some banks do have better records when it comes to which companies they lend to or provide services for. To help you, lots of research has already been done.
In 2020, the Ethical Consumer magazine ranked Triodos Bank — a sustainability oriented bank that only invests in companies that are beneficial to the environment — as the best in its climate change category as part of an overall ranking of ethical banking options.
The Co-op Bank is one of the most well-known high-street banks that has a policy of not providing banking services to the fossil fuel industry. That makes it a good choice for those looking to divest their money from dirty energy, according to Friends of the Earth — although the charity also points out that the Co-op Bank is part-owned by hedge funds and cannot control what those hedge funds invest in.
You might also consider getting a Treecard, not a bank per se, but a prepaid spending card (that is actually made out of wood, incidentally). You can send money from your own bank to your Treecard, tracking funds and spending on an accompanying app, and it will fund reforestation efforts with the transaction fees generated when you buy anything. The company, which launched in 2021, says that “80% of its profits will go to reforestation and climate investments.”
Still confused? Find out more about what your bank (and your energy provider) are up to using the platform switchit.green.
3. Use an App to Track the Carbon Footprint of What You Buy
It’s easier than ever to keep a watchful eye on the sustainability credentials of the everyday products you buy. And while it isn’t up to individuals to change what big companies do, nor fight the climate crisis alone, greater customer awareness can help put pressure on companies to improve their carbon footprints.
There are a host of new apps you can use to assess what you choose to spend money on. The Yayzy app, for example, which launched towards the end of 2020, links to your bank account and tracks purchases to work out the environmental impact of what you buy.
It then offers suggestions about how to reduce your carbon footprint with more eco-friendly options. Or you can buy carbon-offsetting credits with Ecosphere+, an organisation Yayzy have partnered with that protects and restores forests.
Another option is Giki Zero, a social enterprise which has an app that lets you see the sustainability “score” they’ve given to thousands of supermarket products when you scan the barcode.
Tune in to this week’s Climate Curious live from The Conduit in London with co-hosts Maryam Pasha and Clover Hogan to connect the dots between finance and climate change, why investors and banks own climate change because they own the fossil fuel system, and how you can use your own money (bank account, pension, insurance policies) to drive change.
Stay Curious!
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