The climate Loss and Damage Fund eclipsed tackling root causes climate crisis at COP27 in Egypt. Fossil fuels were again spared. Investors must fill the gap left open by politicians. Only large-scale investments in renewables will limit loss and damage.
For the 27th time, fossil fuel lobbyists (636 present in Sharm-el-Sheikh) and petrostates managed to get a crucial decision postponed: the displacement of fossil fuels by renewables. The burning of fossil fuels is predominantly responsible for the climate crisis.
With extreme heat waves in Europe, flooding in Pakistan and droughts hitting American farmers, the impacts of climate change are becoming more visible this year. To halt this crisis there is an urgent need to phase out all fossil fuels by shifting investments to renewables.
Persistent delay of this decision has enabled the climate crisis to wreak havoc in developing countries, that now rightfully demands a Loss and Damage Fund. Relief to developing countries which are least responsible and most vulnerable to climate crisis is imperative, but as a result, tackling the impacts of the climate crisis eclipsed tackling its root causes in Egypt.
However, tackling root causes – the burning of fossil fuels – is key to limiting even more devastating consequences. Therefore, paying reparations and investing in renewables should go hand in hand: the Global North should not only finance reconstruction, but also help developing countries leapfrog to renewables. Decreasing fossil fuel supply and demand is imperative, but politicians failed to reach a consensus about the need to phase out of fossil fuels leaving Big Oil of the hook, once again.
Big investors, like pension funds, are not constrained by the same election cycles as politicians; the timeframe required to address climate change largely exceeds these cycles. They need to consider the consequences their investment decisions have on their entire portfolio. Investors know that the costs of runaway climate change will be eye watering. According to reinsurer Swiss Re, rising temperatures could slash the global economy by 11 to 14% (about 23 trillion a year) by 2050 if the world fails to rapidly phase out fossil fuels.
Making a profit in a world with rising sea levels, wildfires, extreme weather events and other climate damage will prove to be difficult. Consequently, the climate crisis poses a systemic threat that could wipe out assets worth trillions of dollars; this would place many investors, like pension funds, at risk. Investors who regard themselves as “stewards of the global economy,” are therefore determined to limit global warming to 1.5 °C.
Therefore, investors that vote in favour of climate resolutions at oil majors surged from 2.7% in 2016 to 15-39% in 2022. These climate resolutions, filed by shareholder group Follow This, urge Big Oil to drive down emissions.
Big Oil will only start making large-scale investments in renewables to drive down emissions if investors are crystal clear; only then will the world be able to meet the increasing demand for energy while almost halving emissions by 2030 to stay on a Paris-aligned 1.5°C pathway.
To conclude, more fossil fuels mean more loss and damage. The technology and the public impulse to transition to a sustainable economy is widely available. Big Oil has the engineering prowess, the billions, and the global reach to accelerate the energy transition. Someone has to tell them that business as usual is over. Since politicians are hesitant, Big Oil’s shareholders, their rightful owners, must therefore take decisive action and urge this industry to shift their investments from fossil fuels to renewables.
Mark van Baal
Mark van Baal is the founder of Follow This, the group of over 9,000 green shareholders who, together with large investors, urge Big Oil to shift investments to renewables. At the 2022 shareholders’ meetings, the Follow This climate resolution garnered 15-39% of votes.
* according list of Global Witness