Markets have mostly taken Donald Trump’s victory in the US presidential election in their stride. Treasury yields are higher, leading to the usual wave of panicked headlines, but the wholesale markets rout feared last Tuesday simply didn’t happen. There were some Trump-specific themes to trade — sell Mexico, Ukraine and the Baltics, buy pharma and banks — but the market took these in its stride.
That doesn’t mean everything is OK though, far from it. Markets are adept at ignoring the repulsive views of political leaders across the world, but Trump’s attitude to climate change could sink us all. The Donald believes climate change is a Chinese conspiracy, and wants to remove environmental protections such as the Clean Power Plan. He plans to abandon the Paris climate deal, and may appoint Myron Ebell, a noted advocate for the oil and gas industry to run the Environmental Protection Agency, where he’s expected to open up more federal lands to oil exploration, mining, and forestry.
Trump's victory comes as many Western-headquartered banks are already moving away from coal.
Some forward-thinking institutions, such as Sweden’s SEB, now refuse to finance coal power at all, with Natixis, Crédit Agricole and Société Générale cutting out project finance for new coal installations (meaning they can still lend to power utilities with coal in the mix).
Other banks, such as HSBC and Standard Chartered, have a hard limit and a high hurdle on dirty power in developed markets, with a lower standard for developing countries. HSBC’s commitment is that it will not finance new coal power with a carbon intensity higher that 550g CO2 per kilowatt hour in developed markets (which pretty much precludes coal, without carbon capture and storage tech), but has an 850g per kilowatt hour limit in developing countries.
These commitments to cut coal so far are modest, and don’t represent a major sacrifice for most of the players. The coal industry is struggling with economic pressures quite apart from its damaging environmental position, particularly in regions which already have large installed solar capacity.
But with a US president committed to reviving the industry, that could easily change, and banks could easily find themselves tempted to dip a toe back into filthy finance, as the might of the US government, with its tax incentives, and infrastructure spending, swings behind the climate vandalism coal power represents. Banks are used to following governments, not leading, on matters of ethics and environment.
Trump’s victory, however, marks the moment when that should change.
Republicans in the House, Senate and White House might not believe in climate science (plenty of them don’t believe in evolution, either), but that won’t protect them, the low-lying regions of Florida, or the rest of the world from the effects of climate change. The finance industry can’t alter the political composition of the US government, but the least it can do is keep to its climate commitments.