Green finance has hit a tipping point. If the market cannot make it work, and quickly, it risks becoming nothing more than a platitude for finance professionals to talk about while the world burns.
Oil major BP’s lacklustre results on Tuesday are a bitter blow to hopes that green finance can make a meaningful difference in the battle against climate change.
Underlying replacement cost profit at the company fell to $8.9bn in 2024, from $13.8bn a year earlier.
This has led to soul searching at BP, with chief executive Murray Auchincloss saying alongside the results that the company plans to “fundamentally reset” its strategy.
This has been widely taken to mean a watering down of BP’s energy transition plans, echoing moves made by some rivals.
Best laid plans
In 2020, BP said it would have developed 50GW of renewable generating capacity by 2030. This is not impossible. At the end of the third quarter of 2024, its pipeline of renewables projects totalled 46.8GW. But by the end of 2023, it had only developed 6.2GW.
If BP’s recent body language on sustainability is anything to go by, the 50GW goal, and possibly BP's ambition to be a net zero company by 2050, are on the chopping block.
Investors will learn more on February 26, when BP holds a capital markets day.
But last year, the company put its 1.7GW US onshore wind generation business, Wind Energy, up for sale. Auchincloss also put a pause on new wind projects and increased emphasis on BP’s core fossil fuel business.
In December, the company moved $1.8bn of wind assets into a joint venture with Japan’s Jera, separate from its main business.
If BP slows its shift to green — or goes into reverse — it will be a cruel setback for sustainable finance.
BP is the oil and gas major that has most enthusiastically embraced a low carbon future.
For environmentally conscious investors, it has been a beacon of hope that even the most polluting companies can transition. They have engaged with it and encouraged its greener instincts for years.
If BP turns its back, that suggests it does not care what sustainable investors want, and can afford to ignore them.
This comes as the sustainable finance movement is already facing a crisis from Donald Trump’s return to the White House.
Trump's stance is virulently anti-green, and he has already signed a raft of executive orders reversing the US’s transition towards less damaging technologies.
Most recently, on Tuesday Trump signed an order bringing plastic drinking straws back into government use and banning their paper equivalents.
No going back
For the green finance market, the troubles it faces now are cataclysmic.
The worst polluters must be on board to make the big changes necessary to green the economy. Financing a medium-sized wind farm company might feel nice and green, but it will do little to save a warming world if oil companies are rejecting change.
Their U-turn back towards burning fossil fuels shows that the sustainable finance movement has failed to make a real impact where it matters.
And yet it had the means. BP had $59bn of debt at the end of last year. Fixed income investors have a loud voice they could have used to influence the company, but failed to use it in the right way.
Green finance needs a rethink and revival, particularly to make it more palatable to US investors, but also to strengthen its influence on corporate boards.
But with BP on the verge of retreating from its energy transition plans, this innovation needs to happen quickly — or the major companies that must change their approach will be too far down the wrong road for any amount of sustainable finance influence to make a difference.