Half of oil and gas producer investments must go to clean energy

December 5, 2023|Written by |Banco Central de Chile, European Central Bank

Oil and gas producers must step up clean energy investment according to the IEA, while Largarde says the ECB is steadfast on climate, plus more in the latest roundup.

IEA: oil and gas producers face ‘pivotal choices’

Oil and gas producers should spend half of their annual investments on clean energy by 2030 to align with global climate goals, says a report published by the International Energy Agency (IEA).

Oil and gas companies currently account for just 1% of clean energy investment globally and the “industry is facing a moment of truth at Cop28″, said IEA executive director Fatih Birol.

Birol warned that carbon capture technology is not a substitute for cutting emissions and investors must let go of “the illusion that implausibly large amounts of carbon capture are the solution”.

He also stated that the report offers a roadmap for oil and gas companies to “take a real stake in the clean energy economy while helping the world avoid the most severe impacts of climate change”.

Lagarde: ECB remains committed to climate amid geopolitical turmoil

Christine Lagarde, president of the European Central Bank (ECB), used a recent speech to reaffirm the bank’s commitment to supporting the transition to a net-zero economy.

“In today’s challenging geopolitical environment, it is easy to lose sight of this unfolding climate crisis, but we must remain committed to supporting the green transition”, she said.

In a quarterly speech to the European Parliament’s committee on economic and monetary affairs, Lagarde stated that economic and environmental challenges compounded with mounting geopolitical tensions have increased uncertainty and economic volatility.

In this period of parallel crises, she said, we must increase efforts to “make our economies more resilient” by progressing the green transition. According to Lagarde, this will accelerate Europe’s energy independence and “reduce the likelihood of higher and more volatile energy prices”.

Large investments in green technologies and a stable inflation outlook are crucial to enable the transition, said Lagarde. The ECB will remain committed, within its mandate, to protect green investments while also providing an “anchor of stability”.

Bankers call for financial sector to be included in EU sustainability regulations

Senior officials from the ASN Bank called on the EU to include financial institutions’ activities in the corporate sustainability due diligence directive in a recent article for the Finance for Biodiversity Foundation.

“There are no clear reasons why the financial sector should be treated differently than companies.” they said. “In the face of escalating environmental and social global challenges, there is a critical need for financial institutions to adopt a proactive and responsible stance toward sustainability”.

According to the authors, “a critical gap remains, as the EU still lacks adequate legal incentives to compel financial institutions to actively utilise [disclosure] data actively”.

The article echoes a recent speech from ECB board member Frank Elderson, in support of including financial institutions in mandatory environmental and social due diligence requirements.

The negotiations on whether to include financial institutions will continue next month.

GFANZ to work on adding nature to transition planning

The Glasgow Financial Alliance for Net Zero  (GFANZ) will soon start work to incorporate nature into transition pathways, according to a report in Responsible Investor.

Joy Williams, head of financial institution transition planning at GFANZ, said that “there is a lot of momentum in this space”. She also said stakeholders have “responded well to thinking about nature as a climate mitigator, adaptation support, and then provider of ecosystem services”.

But Williams added that “there is a demand to avoid any unnecessary fragmentation” of GFANZ’s mitigation work.

Chile addresses macroeconomic impacts of nature loss

Recent years have “seen dire warnings of the deterioration of nature and its consequences”, Rosanna Costa, governor of the Central Bank of Chile, said at the bank’s annual conference on Monday.

In her opening remarks, Costa cautioned that we are running “very short” on the commitments made to halt the damage to nature, risking multiple natural tipping points being crossed with material repercussions on the global economy, the financial system and the welfare of society.

The conference gathered experts to consider the impacts of climate change and ecosystem services degradation on macroeconomic and financial stability.

Speakers addressed a range of issues, including the macroeconomic impacts of ecosystem degradation, biodiversity loss as a financial risk, climate risk exposure of insurers, and the impact of climate change on financial stability.

A new paradigm needed for ESG in Africa

Transition pathways pursued by rich nations risk failing to serve the interests of African economies, warned Pravin Gordhan, South Africa’s public enterprises minister, in an interview during the Moral Money Summit Africa last week, hosted by the Financial Times.

Gordhan said: “Instead of trying to fit Africa into ESG, we need to ask the question: what are Africa’s priorities in the modern day world?”. He also raised the issue of how investing strategies can “take better account of the needs of African economies”.

According to Gordhan, rich-world governments need to do more to encourage socially and environmentally sound green energy investment across Africa’s diverse economies

Investment strategies that prioritise human capital development, infrastructure and industrialisation, he said, can support the continent to pursue a green path that leapfrogs the polluting path wealthy nations used in their development.

This page was last updated December 6, 2023

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