Capitalism and Climate Change

In a stark warning over global heating, Mark Carney,  the governor of the Bank of England,  said the multitrillion-dollar international capital markets – where companies raise funds by selling shares and bonds to investors – are financing activities that would lift global temperatures to more than 4C above pre-industrial levels. The global financial system is backing carbon-producing projects that will raise the temperature of the planet by over 4C – more than double the pledge to limit increases to well below 2C contained in the Paris Agreement.

The risks associated with temperatures at or above 4C include a 9-metre rise in sea levels – affecting up to 760 million people – searing heatwaves and droughts, serious food supply problems and half of all animal and plant species facing local extinction.

Carney suggested companies had already secured financing from investors in the global capital markets – worth $85tn (£67.2tn) for stocks and $100tn for bonds – that will keep the world on a trajectory consistent with catastrophic global heating.  Carney did not give a timescale for the temperature rise, but said: “The objectives are there, but policy is not yet consistent with stabilising temperatures below 2C.

“There are some companies out ahead, either because of stakeholders, or because they’re anticipating that that will change. But there are others that are waiting for the policies to adjust.”

Carney told the committee that Japan's Government Pension Investment Fund (GPIF). analysis showed it held assets consistent with 3.7C heating, and that the fund was now trying to manage this down. He said that AXA, the French insurance group, priced US government bonds at 5.4C, to reflect the carbon-intensive nature of the American economy. Based on these assessments, “it indicates that if you price the capital markets – and I’m not giving you a precise figure – that all of the assets are probably north of 4C for the capital markets as a whole,” he said.

“We can observe where the market is in terms of pricing the transition. It’s at least 3C or 3.75C, it’s probably north of 4C. That tells you something in terms of the sum of global climate policy.”

The governor said the transition to a low-carbon world economy would still require investors to back firms with significant carbon footprints, given the scale of the adjustment required. 

“It’s not as simple as saying, ‘Well I’m going to invest in only renewable energy.’ The system as a whole cannot invest only in renewable energy. The contribution of manufacturing or an industrial company in terms of lowering their carbon footprint over the next decade, a big reduction in that, can be as significant if not more significant than further development in the short term on renewables,” he said.

The European Investment Bank (EIB),  the largest public bank in the world and owned by EU member states,  announced this year that it would end lending to new gas projects, having already curtailed funding for coal and oil. This would free up more money for renewable energy developments  but last-minute lobbying has forced a postponement. Climate campaigners fear the measures will be delayed further and weakened.

“This delay is a direct result of Germany and the European commission pushing to add more fossil fuels back into the policy. This is the opposite of the leadership demanded by millions of climate strikers and activists around the world,” said Alex Doukas of the NGO Oil Change International. “We are in the middle of a climate emergency, so it shouldn’t be hard to say no to more public money for fossil fuels.”

The Guardian revealed the world’s largest investment banks and asset management companies had aggressively expanded into new coal, oil and gas projects since the 2016 Paris climate agreement.

https://www.theguardian.com/business/2019/oct/15/bank-of-england-boss-warns-global-finance-it-is-funding-climate-crisis

https://www.theguardian.com/environment/2019/oct/15/concerns-eu-bank-balks-plans-halt-fossil-fuel-investments-climate-action-eib