As one former banker who used to do energy deals told me here at COP27, the financial incentives have tilted back toward fossils.
Andrew: The banks’ early commitments on reducing fossil fuel financing were, in truth, never a moral decision. It was, at the time, good business. Clients, investors and regulators were rewarding firms that were focused on the climate. Banks were getting more business from like-minded clients: Big pension funds, especially in Europe, were buying their shares, driving up their price, and regulators were looking more kindly upon them. It was, all in, considered a good look to be concerned about the climate. And let’s not be completely cynical — there were employees and other stakeholders that absolutely did believe in moving away from fossil fuels.
But when Russia began its war with Ukraine, fossil fuel prices skyrocketed, and even more than that, the debate shifted again: Energy is now viewed through the prism of national security, massive economic pain and keeping humans warm enough in the winter so that they don’t die.
Is there any reason for optimism?
Somini: There’s another way to look at this moment. For years, banks financed way more fossil fuel projects than renewable energy projects. That’s beginning to shift.
For every $1.25 invested in fossil fuel projects globally, a dollar is invested in renewables, mostly solar. It’s not the trajectory that’s needed to stay within safe climate limits. But it’s something.
Today, spending on renewable energy and storage account for the vast majority of new investment going into the power sector, the International Energy Agency says.
Andrew: The new “good look” has become to support fossil fuels, at least in the short term. That may be an unpopular view, but it has largely become the conventional wisdom among business and policy leaders.