Finance is fossilised

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Finance is fossilised

Olly Copplestone cartoon journey to net zero 25Feb21 575x440

Look at any bank’s website or hear its CEO speak and you will get a torrent of virtuous words about climate change, sustainability and supporting clients on their journeys to net zero. The same goes for big investors, from BlackRock down, but the windows of their ivory towers are misted up with all the hot air being spouted.

Rub it away and look outside. In the real world, companies are pumping out hydrocarbons as fast as they can.

As any informed capital markets specialist can tell you, the 2020s are the decade of transition. But in the UK — the first G7 country to set a net zero target for 2050 — plans are afoot to build 10 gigawatts of new gas power stations this decade.

They will be designed to last 30 years or more but risk being obsolete before they open. How can companies such as EP Holding, SSE and Sembcorp plan such investments? Because they are confident of support from the financial sector.

The same goes for Total, which wants to increase fossil fuel production 50% between 2015 and 2030. Investors including Axa, Amundi and BNP Paribas voted down or abstained on a climate motion at Total last year.

Will banks murmur an objection when Total wants to bring the first of its climate KPI-linked bonds to market? On the contrary, they will fight to lead the deal.

The finance sector’s rhetoric is increasingly aligned with combating climate change and taking responsibility for society’s well-being.

Its actions, however, take it charging off in the other direction: making money by financing things that make climate change worse. One day soon, that suicidal rush is going to collide with reality.

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