For all its rhetoric, much of Australia’s financial industry is failing to step up on climate.
The rolling climate-driven disasters of bushfires and floods have largely failed to move them to meaningful action.
The Intergovernmental Panel on Climate Change’s Sixth Assessment Report, with its direct language and whole chapter on finance, should be a wake-up call to those in the business community who are avoiding taking genuine action on climate change.
United Nations Secretary General Antonio Guterres didn’t mince his words when he introduced the report to the world, bluntly stating that investing in “new fossil fuel infrastructure is moral and economic madness.”
The sixth assessment report makes it clear financial institutions and markets are greatly underestimating climate related financial risks.
There is little evidence investors’ growing attention on climate change has led to emission reductions.
And there is little evidence that the growing attention of investors on climate change has led to emission reductions. In fact, the report calls out commercial banks and export credit agencies for the role they are still playing in financing fossil fuel investments.
In Australia, we know some of our biggest banks are still investing in expansionary fossil fuel projects and some of our largest super funds remain heavily invested in fossil fuel companies that are working on new or expansionary fossil fuel projects.
This is despite the fact many of these same institutions state they are committed to the Paris Agreement and many have net zero by 2050 targets.
The IPCC report also calls out the lack of data on investments and financing to high emission activities by financial institutions because “relevant actors currently have little incentive or obligations to disclose such information compared to reporting on and communicating about their activities contributing to climate action.”
In short, it is extremely difficult for stakeholders to know how companies are tracking on their commitments to reduce their emissions because many companies refuse to provide public timelines or short-term transition targets in line with the latest science.
It is increasingly clear many of these companies have something to hide when it comes to climate.
While there is a role for governments, central banks and regulators to shift incentives, financial institutions – many of which claim the mantle of leadership – must be the ones to take action.
They need to make sure they aren’t investing in projects that expand the fossil fuel industry and explain how they plan to phase fossil fuels out of their business activities in line with the science.
This is the minimum requirement. And it’s a level most in the financial sector are failing to reach.
Continued investment in fossil fuels means coal, oil and gas will be baked into the system for longer and there will be less capital available to fund the clean transition.
The report makes it clear much more capital is needed to drive the transition faster.
There is a great opportunity, but it requires genuine commitment to change at a pace that recognises the urgency of the climate crisis.
The growing influence of ESG (environmental, social, and governance) through the financial and other business sectors is a welcome development, but as the UN Secretary General say, “Some government and business leaders are saying one thing – but doing another. Simply put, they are lying.”
Banks and super funds need to match their rhetoric with action and make sure they are part of the solution rather than active supporters in expanding the fossil fuel industry.
Matthew Rose is the Economy & Democracy program manager at the Australian Conservation Foundation