Bill McKibben: Wall Street must force Big Oil to change its fossilized ways

Climate Economy

Bill McKibben: Wall Street must force Big Oil to change its fossilized ways

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The noted environmentalist says driving institutional divestment away from fossil fuels is the best way to slow global warming

The global effort to combat climate change has reached a critical point, says veteran climate change activist and author Bill McKibben. The surge in institutional divestment coupled with the economic impact of the coronavirus pandemic has wrought heavy damage to the fossil fuel industry. The oil, coal, and gas sectors have been further discredited by a new U.S. Energy Information Administration report that shows renewable energy is already surpassing coal in the United States.  Every day, it seems, experts on both sides of the climate debate are announcing that coal and oil may never recover in the post-pandemic economy.

McKibben, who has written more than a dozen books and is the cofounder of the organization 350.org, reflects here on the current moment and the role investment money plays in efforts to halt climate change. The campaign to divest from fossil fuels has had a huge impact since its beginnings in 2013: Since then, $14 trillion in endowments and investment portfolios have been moved out of coal, oil, and gas. Now a new global campaign, Stop The Money Pipeline, aims to compel investors and insurance companies to quit fossil fuels. The effort is a collective of more than 50 organizations. In addition to 350.org, members include such major players as Greenpeace and the Sierra Club. Bill McKibben spoke with us about the importance of following the money in the battle against climate change.

 

 

Banking on climate

The big financial institutions are really a crucial pipeline,” McKibben says. “After the Paris Agreement, they just kept pumping more and more cash in the wrong direction. If we can crimp that pipeline, we can weaken the fossil fuel industry and undercut its expansion plans. That money is the oxygen on which the fires of global warming burn.”

Recently, several major financial institutions and companies⁠—BlackRock, Microsoft, insurance provider Liberty Mutual, and even BP and Shellhave been stepping up their climate change commitments. Or they’ve been issuing carefully prepared statements aimed at leaving that impression. The question is whether their good words will translate into concrete action. “A company like BlackRock has made serious noise,” McKibben notes. “I think almost certainly they applied pressure to get JPMorgan Chase Bank to demote their notorious climate-denying board chair [Lee Raymond, former CEO of Exxon], so that’s a good first sign.” 

The big financial institutions are really a crucial pipeline,” McKibben says. “After the Paris Agreement, they just kept pumping more and more cash in the wrong direction. If we can crimp that pipeline, we can weaken the fossil fuel industry and undercut its expansion plans. That money is the oxygen on which the fires of global warming burn.”

McKibben played an important role in pressing for the demotion of Raymond, renowned among climate change advocates as a major foe. McKibben and the Stop the Money Pipeline coalition put significant pressure on Chase to replace Raymond by the end of summer 2020. It remains to be seen if the bank will make changes in its institutional behavior. After all, this is the largest global lender and underwriter of the fossil fuel sector, with $268.5 billion going to finance fossil fuel enterprises from 2016 to 2019. 

“The shareholder season was indeed interesting,” says McKibben. Chase shareholders, he notes, “came within a whisker” of ordering the bank to make themselves Paris-compliant. “Meanwhile, Exxon’s CEO told his shareholders he had no interest in setting targets for lowering emissions or in producing renewable energy.” The growing split between investors and climate-laggard companies like Exxon is “proving to be quite useful,” says McKibben, and will further isolate those who won’t move. BlackRock, for example, wouldn’t support climate initiatives in Australia but voted for climate shareholder resolutions against Exxon.

McKibben has thoughts on Chase’s future, explaining:I predict Chase will lend a lot less to the fossil fuel industry in years to come, in part because of great campaigning pressure and in part because it’s an ever less robust industrythe pandemic has revealed some deep structural weaknesses.”

McKibben says that right now, it wouldn’t be hard for BlackRock, for example, to ask the S&P or Moody’s to create an index of companies formerly invested in fossil fuels and then to use that as the default for their big clients. “That way, if you wanted to invest in global warming, you’d have to ask for it,” McKibben says.

“Pace is everything”

But the overarching question regarding the movement of money out of fossil fuels is speed. Will disinvestment come soon enough to make the necessary difference? 

“Pace is everything,” McKibben says. “We have to make it as fast as possible. A few decades out, the world will run on sun and wind because it’s cheap. But if it takes that long to get there, it will be a broken world.” 

The 17% global drop in emissions due to the coronavirus has shown us what is possible. But to maintain the lowered emissions level would require a transition to a very different world and a very different global economy. The pandemic offers a wake-up call, a chance to leave the status quo behind and invest in green alternatives. But will the world—and its investors and institutions—take advantage of the historic opportunity? 

 A few decades out, the world will run on sun and wind because it’s cheap. But if it takes that long to get there, it will be a broken world.”

“I think we will,” says McKibben. “And in some countries, it will happen quickly. It feels as if the Australian fires may have shaken up attitudes there. I was so happy to see Westpac Bank [one of Australia’s Big Four major banks] beginning to back away from coal and gas, and to know it was the hard work of campaigners that got the deed done.” McKibben said. “It will be harder in America, of course, with Trump in office.”

Wake the financial giants

Many on the institutional investment side—from sovereign wealth funds and large pension funds to insurance companies and consumer banksseem to be waking up to the grave threat posed by climate change. Awareness is the first step, but just as green rhetoric must be translated into concrete action, green awareness also must result in actual, substantive action.  Institutional divestment is a key strategy

“There are American, U.K., European, and Australian banks that have done remarkable things,” McKibben says. “On the East Coast, Amalgamated Bank is entirely free of fossil fuels. On the West Coast, the Beneficial State Bank is the same. In most parts of the U.S., people can put their savings inand take credit cards fromlocal credit unions without worrying that their money is being diverted to wreck the climate.” And it’s worth noting that the European Investment Bank, the lending arm of the E.U., was the first to announce that it will end all financing of oil, gas, and coal projects as of 2021. This is a real sign that mainstream money is moving away from fossil fuels.


“ ‘Fossil-free?’ is a good question to ask.”

And many signs point to money continuing to flow in that direction: Interest has been exploding in recent years in the Environmental, Social, Governance (ESG) framework and in impact investment funds. But there is one hitch: It can be difficult for investors to determine what is and is not a good climate investment, given that consistent global standards regarding climate simply don’t exist. McKibben acknowledges the problem but has to-the-point advice about how investors can start to figure this out: “ ‘Fossil-free?’ is a good question to ask,” he says. 

Looking to the future, McKibben is hopeful. He notes that many countries, particularly in Europe, are implementing large green stimulus packages to pivot to renewable energy while boosting their economies.  And, he says, at this point in history, “it’s pretty hard to argue that trying to make money off fossil fuels is responsible in any real sense of the word.”

Blair Palese, Climate & Capital Media’s global climate advisor, cofounded 350.org Australia and was its CEO for 10 years.

Photo by Blair Palese

Written by

Blair Palese

Blair Palese is a writer and project manager on a range of climate change projects. In 2009, she cofounded 350.org Australia and was its CEO for 10 years. Previously, she was a communications director for Greenpeace International and Greenpeace USA, head of international public relations for the Body Shop, editor-in-chief of Greenpages magazine, and worked at Washington Monthly and ABC.