JUICE: Greenvestment

The most hopeful development to emerge from the clatter of announcements made at last week’s Global Climate Action Summit was green financing, both on the divestment and investment fronts.

“There has been a 12,000 percent increase in divestments,” said Emily Chew, Managing Director at Manulife Asset Management.

To date, 985 institutional investors managing $6.24 trillion in assets have committed to divesting from fossil fuels, up from $52 billion four years ago.

Divestment is about “de-risking loans,” said Jim Mahoney, strategy executive w ith the Bank of America. He prefaced his statement by noting how the bank’s headquarters in North Carolina, and its large number of employees, were being slammed by the climate driven Hurricane Florence as he spoke.

The growing numbers of national, state and regional entities, and private organizations unwinding their fossil fuel sector investments, is cause for hope.

Five of Japan’s financial heavyweights are slashing lending to coal plants.

Japanese banks, Mitsubishi, Mizuho, and Sumitomo Mitsui Banking, which are some of the world’s biggest coal industry financiers, are scaling back loans to polluting coal plants.

“Sumitomo Mitsui Trust Banks’s plan to restrict project finance for new coal-fired power plants regardless of their geographic location has the potential to be the strongest policy announced by any bank in Asia,” said Shin Furuno, 350.org Japan Divestment Campaigner.

Across the globe, Ireland is divesting all if its fossil fuel investments over the next five years. It is the first nation to so.

“This brings control of fossil fuels to government and away from future oil producers,” Denis Naughten, Ireland’s minister for climate action and environment, said during the climate summit.

The Emerald Isle is divesting holdings in coal, oil, gas and peat, a homegrown and highly polluting source of heat, from its $10 billion portfolio. Peat is partly decomposed vegetable matter, often found it bogs. When burned for heat, it emits large amounts of carbon emissions.

In addition, huge pension funds and investment companies have and are divesting.

Last Friday, New York City Mayor Bill de Blasio said his city’s pension funds, holding $189 billion in assets, are getting out of the fossil fuels sector over the next five years.

“We are taking $5 billion out of a dying and broken industry,” he said.

The city pension funds follow in the footsteps of New York State pension fund divestments.

Last year, California’s two huge state pension funds dropped their coal holdings. In Aug, 2017, the California Public Employee Retirement System announced it had divested most of its coal holdings and the California State Teachers Retirement System had divested all of its holdings, in accordance with a 2015 state law.

The investments were fairly minor for the massive pension funds. CalPERS, which holds about $290 billion in assets, divested its $250 million in coal shares. CalSTRS, which holds about $280 billion, divested its $1.5 million investment in the black rock. Although the funds did not hold big coal investments, the significance was in the market signal the actions sent, including to other pension funds, several of which followed suit.

In a reversal, now New York’s action is putting pressure on California’s large pension funds to divest from oil and gas.

As notable as the growing wave of divestment is the accompanying surge in green infrastructure investments.

Billions of dollars has been pledged to advance climate protection measures, from renewable energy to electric vehicles.

But, investors acknowledged at the end of the summit that their recent steps of moving money from brown to green industries is just a down payment. It is far short of the $1 trillion needed annually in low-carbon and sustainable investments until 2030 to meet the Paris Accord commitment.

Over the next three years, New York City is directing $4 billion to clean energy and climate solutions, according to de Blasio.

Over the next five years, $4 billion in philanthropic money is being invested in climate protection measures, according to Nat Simons, Co-founder, Prelude Ventures.

Other green energy investment announcements made at the end of last week include: CDPQ, Canada’s second largest pension fund, committed to increasing its low-carbon investments by 50 percent by 2020, representing more than US$6.2 billion in new investment. It also pledged to reduce the carbon intensity of its portfolio by 25 percent by 2025. PKA, Denmark’s labor market pension fund is to grow its investments in low-carbon climate solutions to $5 billion, or 10 percent of its assets, by 2020. It currently has $3.5 billion invested in low-carbon assets, said Peter Damgaard Jensen. These green investments are not only an ethical imperative. They also are profitable.

PKA’s Jensen noted that the annual returns were 10 percent.

Although the low-carbon investments are not yet on a scale of what is needed to meet the Paris Accord they surely will gather momentum. That will hopefully be in time to keep Mother Earth from having a fatal heat stroke.

As was noted by financial analysts at the climate summit, there are more than enough financial assets to provide cities, regions, states and nations with needed funds for green sustainable infrastructure investments. Directing the necessary funds to green financing won’t be easy. But, many of us are betting it will happen because it makes sound financial and environmental sense for rich, poor and those of us in between. — Elizabeth McCarthy

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JUICE: Greenvestment

William J. Kelly

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