Governments dithered on Covid-19. Will it be the same on climate change?
Technology and finance offer the best hope of a sea change in policy
Governments are beholden to the fossil fuel industry for three obvious reasons. Photograph: Eric Taylor/Bloomberg
What’s the one indisputable takeaway from the current pandemic? The need to act swiftly and decisively in a crisis. Those who dithered or disputed the risk – China, the US, the UK – have reaped a whirlwind of damage on their respective states.
Governments across the world, including the Irish one, are, however, in danger of failing to see how this lesson applies to climate change. They are as deaf to the warnings of an incoming climate disaster as they were to the risks posed by Covid-19 when it first emerged in China in January.
Governments talk up their green credentials, greenwash their press releases and make the right noises publicly, but they are anchored to a different set of policies, to interests that are working off short-term horizons that come with irreparable environmental damage.
A recent study by the International Monetary Fund (IMF) estimated that direct and indirect subsidies for coal, oil and gas in the US reached $649 billion (€598 billion) in 2015, $50 billion more than the country’s defence budget.
Governments are beholden to the fossil fuel industry for three obvious reasons. Taxes and other revenue streams from it shore up their budgets. Fossil fuel industries are also big employers, making it politically difficult to move against them. Governments are also exposed to a lethal degree of lobbying behind the scenes, which queers the pitch in favour of minority interests. Big oil and gas companies have been secretly funding disinformation campaigns around climate change for decades, questioning the science, smearing advocates, pushing a message of equivocation to delay or water down action.
Trump’s decision to pull the US from the Paris climate accord in 2017 may go down as one of the biggest lobbying coups of modern times. Tragically this has left us on the brink of a major shift in the Earth’s climate, the ripples of which are already being seen in the form of more extreme weather events: heat waves, droughts, floods,hurricanes. Scientists say we have a window of just 10-15 years to change course, after which point it maybe too late.
But there is something else happening that’s tipping the balance back towards a more sustainable path. Technology. The energy transition from high carbon to clean energy – the shift towards renewables, towards electric cars, towards plant-based foods – has become so rapid and so unstoppable that it has begun to suck in the financial system. And like it or not, money is the ultimate arbiter of policy in this equation.
The market has been penalising oil, gas and coal interests for several years, not as a result of divestment policies in favour of cleaner technologies, but because investors no longer believe in the future of these companies.
A recent study by business consultancy Trove Research found the return on invested capital in the renewable energy sector outstripped that in the oil and gas sector over the past six years, while the return from renewable equities was nearly double that from the oil and gas sector. A cursory glance at oil prices in recent months reveals the white-knuckle ride investors are on.
The philanthropic arm of the Rockefeller family, the Rockefeller Family Fund, who are sitting on a multibillion-dollar oil fortune, and which dumped all its fossil fuel investments five years ago, said last week its funds had beaten all the relevant market benchmarks since divesting.
The shift is exemplified by Legal & General Investment Management (LGIM), the investment arm of the UK insurance giant, which has holds €1.4 trillion in assets globally.
The fund manager has turned into something of a crusader for more sustainable investment, albeit while holding investments in some of the biggest oil companies in the world.
For the last three years, it has been voting aggressively against boards, chairpersons and chief executives, who are failing to shift gear on the issue.
Its latest target is Darren Woods, the chairman and chief executive of ExxonMobil, the world’s largest listed oil and gas company.
LGIM has pledged to vote down his re-election at the company’s annual general meeting later this month, citing Exxon’s “persistent refusal” to disclose its full carbon footprint and to set company-wide emissions targets.
It is also backing a resolution for increased transparency on political lobbying amid accusations that Exxon has been lobbying against climate action via shadowy third-party industry bodies.
The Rockefeller Family Fund has previously described Exxon as “morally reprehensible” on foot of a series of reports that it knew about global warming as far back as the 1970s and sought to hide what it knew from investors, policymakers and the public.
Critics claim LGIM is attempting to have it both ways. Taking the moral high ground on climate change while maintaining its investment and making money off these companies, and is effectively dancing on the head of pin.
Push for change
As a money manager, the company, however, says it cannot unilaterally divest of these assets without the permission of its investors, typically big pension funds, but is using its shareholder muscle to push for change from the inside.
“ To remain successful in a low-carbon world, companies must act today, aligning their capital decision with the goals of the Paris Agreement, and setting stretching targets,” Meryam Omi, LGIM’s head of sustainability and responsible investment strategy, said.
As proof of its bona fides, it has been busy shifting the balance of its own internal funds towards more sustainable investments. It has also got UK oil giant BP to sign up to reducing its carbon footprint to net zero by 2050, seen as a breakthrough moment for the industry, and a breakthrough moment for the climate agenda.