Leaders of two of the world’s largest economic institutions made the case Tuesday that tackling climate change requires no trade-offs between raising revenue and promoting growth. Christine Lagarde of the International Monetary Fund (IMF) and Jim Yong Kim of the World Bank reiterated two priorities for their own institutions: to remove the fossil fuel subsidies that incentivize the use of fossil fuels at dangerous levels, and to put a price on carbon. The leaders said this approach will lead to economic benefits, while insulating the global economy from risks caused by a planet that warms beyond two degrees. Climate change contributes to lowered revenue, debt and financial instability by damaging agriculture yields, natural resources and infrastructure. Decades of progress on poverty alleviation and economic growth, the pillars of the World Bank and IMF, can be wiped out in a single extreme weather event, which will become more frequent with climate change. These remarks urging governments to discourage the use of fossil fuels come as an Oxford University study reveals that both private and public investors may not be able to ignore deteriorating feelings about supporting the dirty energy sector. Global divestment campaigns are successfully creating a growing negative stigma on businesses and institutions that continue to support the fossil fuel industry, hurting their public image. Together, both this report and the announcements by world financial leaders show that if governments and other institutions transition away from supporting fossil fuels they will be transitioning away from economic risks.
- Campaign to share: Go Fossil Free
- Hashtag in use: #WBLive
- In the wake of the most recent IPCC report, it’s clear that propping up the fossil fuel industry with public and private funds is akin to investing in dangerous climate change and costly extreme weather. World governments have spent $485 billion dollars in fossil fuel subsidies that incentivize the use of the dirty energy that causes climate change. As the impacts of climate change accelerate, governments must also shell out $6 billion per year in response to natural disasters, a price tag that is set to escalate up to $1 trillion annually by 2050 without improved mitigation or adaptation according to Tuesday’s speeches. Phasing out these subsidies will free up government revenue to focus on smart, sustainable solutions to climate change that will save money and save lives.
- Businesses should take their heads out of the sand and face up to the reality of fossil fuel divestment in order to reduce the threat of a poor public image and stranded assets, according to new research. The tide of both private and public funding is being pulled away from fossil fuel corporations as they become stigmatized in the global market, due in large part to the success of the global divestment campaign. New research shows that businesses that continue to invest in fossil fuels face the growing threat of a negative image, as the public is more aware than ever of both the economic and moral flaws of continued investment in dirty energy.
- Shifting investments and subsidies away from fossil fuels and to clean energy and adaptation is a chance to avoid major economic risks while taking advantage of the opportunities for growth, development and innovation held in the green economy. A future of extreme weather events caused by climate change puts billions of people at risk and threatens to reverse decades of global economic advancement. Yet tackling climate change head-on by phasing out subsidies and pricing carbon could raise government revenues, promote sustainable development and spur the growth of jobs and capital in the green economy.
Despite recent criticism for talking tough about the impacts of coal power while the World Bank increased its funding for fossil fuels to US$2.7 billion, the World Bank joined with the IMF on Tuesday to strengthen their argument for the economic case for climate action. Taking part in a live webcast, World Bank President Dr Jim Yong Kim and Managing Director of the IMF Christine Lagarde warned that climate change poses a threat to economic stability and that “one single [natural disaster] could reverse years of success on the poverty agenda”. They argued that investing in climate resilience would pay off in the long run. By tackling climate change, finance ministers “can raise revenue by doing the right thing, and in the same token take care of the future for your grandchildren,” said Lagarde. Both Lagarde and Kim have previously spoken out about the risks of delaying action on climate change. Earlier this year, Lagarde used an IMF event to warn that global financial stability is “clearly at stake” because of climate change. It followed earlier warnings that future generations will be “roasted, toasted, fried and grilled” if urgent action is not taken. Kim has also previously warned that climate change poses a “fundamental threat” to economic development and would hinder attempts to lift people out of poverty. He has also warned that without urgent action to curb climate change “the future will become bleak” and that we risk leaving “our children and grandchildren an unrecognisable planet.”
A report in April backed by the former chief economist of the World Bank Lord Stern found that at least two-thirds of the fossil fuels listed as assets by the world’s fossil fuel companies would have to remain in the ground if governments were to fulfil their pledge of keeping climate change below the danger limit of 2C. The UN’s Intergovernmental Panel on Climate Change (IPCC), backed by 193 governments, reached supporting conclusions at the end of September, when for the first time, they set out in detail a carbon budget, setting out the amount of carbon dioxide humans can emit in the atmosphere without triggering dangerous climate change. Off the back of the IPCC report business leaders PricewaterhouseCoopers (PwC) urged governments to do much more to tackle climate change, which they see as “the mother of all risks.” Days later billionaire investor Tom Steyer, former US Treasury Secretary Hank Paulson, and Mayor Michael Bloomberg also launched ‘Risky Business,’ an initiative to assess and respond to climate risks in the economy.
David Nussbaum, chief executive at WWF-UK, said: “With the IPCC giving us the clearest signal yet of the threats posed by a changing climate, it’s clear that we must consider the risks to businesses and investors posed by investments in fossil fuels. Prudent investors want to be ahead of pack, not following the herd, so they will be preparing for a world where we leave fossil fuels in the ground”. Some organisations are ahead of the curve, the $74bn Scandinavian asset manager Storebrand, the European Investment Bank and the The United Church of Christ have all taken strong measures to shift their money out of high-carbon assets, like coal projects. This week, the Quakers in Britain became the latest group to express an interest in becoming one of the first faith bodies to divest from fossil fuels. At their yearly meeting, representatives called for the body to remove funding from fossil fuels, in a move that would be line with the call from Operation Noah who recently warned “for the sake of humanity’s survival, we cannot afford to invest in fossil fuels any longer.” A final decision to divest now rests with Trustees who will meet on 18 October.
Groups like the Carbon Tracker Initiative and Share Action are working with the finance industry and pension fund members to improve the way the sector accounts for climate change and supports low carbon investment options. Alongside this, groups such as 350.org have been spreading the “divestment” (from fossil fuels) movement steadily, so that now more than 400 cities and universities are facing campaigns to ditch their fossil fuel assets. The concept of divestment has secured some extremely powerful backers, like US President Barack Obama.
Now a new study by the Smith School of Enterprise and the Environment (SSEE) at the University of Oxford has assessed the likely impact of the divestment movement. It finds that despite the relatively modest direct financial impacts the indirect impacts, such as public awareness, stigmatising target companies, and influencing government officials, are likely to be far reaching. In terms of scope, the industry backed report says that the campaign is heading into its second phase, where divestments by prominent bodies herald a tipping point for others to follow in the third wave, where the campaign goes global and begins to target large pension funds and market norms.
The report warns campaigners that “assets divested are likely to be bought again quickly, but by neutral investors who might not care about the campaign”, although this is less likely for coal assets. Rather than unwittingly install investors less willing to pressure fossil fuel companies on issues of environmental sustainability, campaigners would be better served by encouraging investors to engage with firms to change corporate decision-making.
- Campaign against fossil fuel growing, says study (the Guardian)
- Fossil fuel companies cannot afford to ignore divestment trend (BusinessGreen)
- Bubble may burst for fossil fuel giants (Climate News Network)
- Divestment stigma threatens fossil fuel’s future (RTCC)
- World Bank and IMF – We must think about climate change every day (RTCC)
- Photo: World Bank President, Jim Yong Kim
- Photo: Managing Director of IMF, Christine Lagarde
- Photo: Wall Street
- Photo: City of London
- Photos: Stock Exchanges (1, 2, 3, 4)
- Photos: Stock Market Crash (1, 2, 3)
TOOLS AND RESOURCES
- Report: Stranded assets and the fossil fuel divestment campaign (Oxford University)
- Report: Unburnable carbon (Carbon Tracker)
- Report: Turn down the heat: Climate extremes, regional impacts, and the case for resilience (World Bank)
- Report: Turn down the heat : why a 4°C warmer world must be avoided (World Bank)
- Toolkit: A campus guide to divestment (350.org)
- Blog: PwC’s sustainability & climate change team preview the IPCC AR5 Science report
- Blog: Declaration on climate justice (Mary Robinson Foundation)
- Report: Threats of climate change for the UK (PwC)
- Report: Reducing risk and driving business value (CDP)
- “If we don’t tackle climate change – considering the disasters lurking in the future – one single event could reverse years of success on the poverty agenda.” – Dr. Jim Yong Kim, World Bank Group President
- “I would say [to finance ministers] please don’t assume that taking action on climate change will mean your costs go up and that there are no good options. Speak to us and keep an open mind to all the things you can do today that will not only mean a cleaner future but also raise revenue… We can bring ideas to the table that will not only create a better future for your grandchildren but create a better world as well.” – Dr. Jim Yong Kim, World Bank Group President
- “Climate change transcends time. It is a short-term, medium-term and long-term issue. If we do not deal with it now it will be an issue affecting our children and our grandchildren.” – Christine Lagarde, Managing Director, International Monetary Fund
- “You [finance ministers] can raise revenue by doing the right thing, and in the same token take care of the future for your grandchildren.” – Christine Lagarde, Managing Director, International Monetary Fund
- “Stigmatisation poses a far-reaching threat to fossil fuel companies – any direct impacts of divestment pale in comparison…In every case we reviewed, divestment campaigns were successful in lobbying for restrictive legislation.” – Ben Caldecott, research fellow, University of Oxford’s Smith School of Enterprise and the Environment
- “This divestment campaign is just one front in the climate fight, but of all the actions people can take to bring about structural change, it’s probably the easiest. Severing our ties with the guys digging up the carbon won’t bankrupt them–but it will start to politically bankrupt them, and make their job of dominating the planet’s politics that much harder.” – Bill McKibben, divestment campaigner and head of 350.org
- RT @WorldBankLive Kim: If we don’t tackle #climate change, a single event could roll back years of #globaldev work #wblive
- MT @GoFossilFree Oxford report says @gofossilfree movement growing faster than any #divestment campaign in history http://bit.ly/17Pr0GV
- MT @StollmeyerEU “We can create a better world for our grandchildren & it actually makes economic sense” says @WorldBank’s Mr Kim #wblive
- MT @OxfamIFIs @Lagarde: “It is all about getting the price right by removing fossil fuel subsidies and implementing carbon taxes” #wblive
- RT @WorldBankLive #Climate change issues have an impact on economic stability and the environment, says @Lagarde. #wblive
- MT @350 Analysis from Oxford University: Divestment “the most far-reaching threat to fossil fuel companies and the vast energy value chain.”
- RT @saveborneo Divestment campaign could cause considerable damage to fossil fuel industry http://dlvr.it/45yhwr
- MT @GoFossilFree Current fossil fuel #divestment campaign poised to do real damage to industry, says Oxford study http://bit.ly/17Pr0GV