Top financiers are shifting their dollars from fossil fuels to renewable energy, while turning up the heat on oil and gas companies to address emissions and climate risks in their meetings with investors, according to two separate analyses published this week.
The Institute for Energy Economics and Financial Analysis (IEEFA) is reporting this week that some of the world’s leading investors committed more than US$300 billion last year to build renewable energy capacity, pushing total investment in the energy transition above $500 billion.
And Bloomberg Green’s analysis of the transcripts of recent investor calls shows “environmental buzzwords and key phrases” like “carbon”, “climate change”, and “renewables” showing up more frequently than language about business growth in sessions hosted by the world’s 25 biggest fossil companies, including ExxonMobil and Gazprom. “Investors who dialed in to company conference calls of fossil fuel giants this year heard the word ‘carbon; uttered 800 times, exceeding the 790 mentions of ‘growth’ for the first time ever,” the news agency writes. “References to words tied to energy transition so far this year have already outnumbered those for all of 2020.”
IEEFA’s analysis shows global investors “accelerating their collective move away from the massive climate-related risks associated with fossil fuel assets and building capacity so as to increasingly deploy huge amounts of capital into renewable energy infrastructure projects,” said co-author Tim Buckley, the organization’s director of energy finance studies for Australia and South Asia. “The continued expansion of investment shows the resilience of the renewable energy sector despite the economic disruption of the COVID-19 pandemic.”
The report shows the top 10 commercial banks in Bloomberg New Energy Finance’s Clean Energy League Table lending $30 billion to renewable energy projects last year, with European financial institutions dominating the scene but three Japanese banks entering the list for the first time. IEEFA calls the data a “massive step-change in ambition by these financial institutions, which have a combined worth of more than $88 trillion in assets, to advance the Paris Agreement’s decarbonization goals.”
The top 10 equity investors include asset management giants like Amundi, BlackRock, and Brookfield, as well as two Canadian pension funds, the Canada Pension Plan Investment Board and the Caisse de dépôt et placement du Québec [both of which are still investing lavishly in fossil fuels—Ed.]. The report also points to smaller investment funds that are “aggressively investing in the sector, including in greenfield renewable energy investment, which demonstrates the risk-taking and capacity building of these funds as well as their commitment to climate goals,” said report co-author and IEEFA Research Analyst Saurabh Trivedi.
All told, IEEFA documents $501 billion in renewable energy investment last year, including financial backing for renewable energy megaprojects like the 3.6-gigawatt Dogger Bank offshore wind farm in the North Sea and the 2-GW TAQA Al Dhafrah solar project in the United Arab Emirates. “These mammoth projects require investment on a staggering scale, and we’re seeing global investors racing to deploy capital into the growing opportunities of the energy transition, which will grow into a multi-trillion-dollar annual investment opportunity if the world is to deliver on its climate goals,” Buckley said.
Bloomberg’s analysis of investor calls shows that fossil companies’ management teams, “at least publicly, are increasingly engaged on the topic,” the news agency writes. “They’re coming under mounting pressure from investors and environmentalists to come up with a plan to slash greenhouse gas emissions and prepare for a low-carbon future. That push comes as the world’s largest economies aim to accelerate a shift from more polluting hydrocarbons to cleaner energy sources.”
Beyond talking about it, the extent to which fossils are taking concrete steps to address environmental factors “varies and is the subject of much contention,” Bloomberg says. “Every single company, especially the large producers of fossil fuels, must be feeling the pressure right now,” said Laura Zizzo, co-founder and CEO of Toronto-based Manifest Climate. But “the fact that they are feeling the pressure shows that there is going to be more pressure to have that lip service and the potential for greenwashing.”