Major financial institutions rebuke the Trump agenda, announce big steps away from fossil fuels

Both public and private financial institutions are beginning to recognize the risks associated with investing in oil and coal.

Mining trucks carry loads of oil laden sand at the Albian Sands oils sands project in Ft. McMurray, Alberta, Canada. (CREDIT: AP Photo/Jeff McIntosh)
Mining trucks carry loads of oil laden sand at the Albian Sands oils sands project in Ft. McMurray, Alberta, Canada. (CREDIT: AP Photo/Jeff McIntosh)

Two major financial institutions — one public, one private — announced on Tuesday that they would be significantly paring down their investment in fossil fuel projects, signaling a shift in the way financial institutions assess the risks associated with fossil fuels and climate change.

During the One Planet Summit taking place in Paris, France this week, the World Bank announced that it would no longer finance upstream oil and gas — meaning any projects that involve oil and gas exploration or production — after 2019, making exceptions only for extreme cases. Because the World Bank already has a commitment in place restricting support for coal-fired power plans and thermal coal mining, Tuesday’s announcement essentially means that the World Bank will be cease financing of nearly all fossil fuel projects after 2019.

In a separate announcement, also made at the One Planet Summit, insurance giant Axa — which is based in France but does business all over the world — said that it would no longer invest in or insure tar sands projects or U.S. pipelines. Axa also said that it would quadruple its efforts to divest from companies that make at least 30 percent of their profits from coal.

Both announcements signal a broader shift to the global finance community that the era of fossil fuels is ending and that there’s significant risk associated with investing in oil and coal, both reputational and financial,” Alex Doukas, director of Oil Change International’s Stop Funding Fossils program, told ThinkProgress. “The World Bank commitment, in particular, is really profound. No other public finance institution has taken a step that I think is this ambitious in facing its fossil fuel finance to date.”

Axa began divesting from coal in 2015, but on Tuesday committed to selling off more than $28 billion worth of investments in companies that derive more than a third of their revenue from coal. The company also announced that it would immediately stop insuring three major pipelines that carry tar sands fuel from Canada to refineries throughout North America, though it did not specifically name the pipelines that would no longer be insured through Axa. Major European banks BNP Paribas and ING also recently announced that they would divest from tar sands oil, which is one of the most carbon-intensive types of fuel. And in November, Norges Bank — the central bank of Norway — told the Norwegian government that it should divest its $1 trillion sovereign wealth fund, the largest in the world, of all oil and gas shares, which account for about 6 percent of the fund’s assets.

I think there has been a real mainstreaming of concern about climate risk as a key financial risk,” Andrew Logan, director of oil and gas at the sustainability nonprofit organization Ceres, told ThinkProgress. “I think that’s leading different actors to take different steps, but all motivated by the same general concern.”

Doukas, who has worked with other climate activists to pressure the World Bank Group and its board of investors to move away from financing fossil fuels, characterized the World Bank move as even more significant than Axa’s divestment of coal and tar sands.

The World Bank is really a thought leader on climate change, so for them to be taking this step really raises the bar for governments and institutions around the world,” Doukas said. “I am surprised at the breadth of this step that they have taken. It doesn’t touch all of their fossil fuel finance, but it’s a big step.”

Multilateral development banks — like the World Bank — provided more than $9 billion in public finance to fossil fuel projects in 2016, the year after nearly 200 nations agreed to hold the planet to well below 2°C (3.6°F) of warming in the Paris climate agreement. According to an October report by Oil Change International, the World Bank Group was one of the largest financiers of fossil fuels in 2016, investing some $4.7 billion in 2016. Doukas estimates that of that $4.7 billion, around $1 billion was invested in what would qualify as an upstream oil or gas project.

It’s not trivial,” he said of the bank’s commitment. “It’s a pretty significant amount of finance that they are going to be moving.”

The announcements from Axa and World Bank come as the Trump administration has expressed interest in using multilaterial development banks to encourage the use of “clean coal” — which refers to expensive and non-commercially viable technology meant to capture the carbon emissions associated with the burning of coal — as well as oil and gas throughout the developing world.

In August, the Treasury Department rescinded an Obama-era guidance that made it more difficult for multilateral banks to finance coal operations overseas, instead issuing a guidance that directed the department to “help countries access and use fossil fuels more cleanly and efficiently.” At the most recent U.N. Climate Conference, held this year in Bonn, Germany, the United States’ only official event was a panel extolling the benefits of coal, nuclear, and natural gas as energy sources for the developing world. And the White House is reportedly launching an effort to boost U.S. coal abroad by forming an alliance between coal-reliant countries, like Indonesia, China, and India, and the United States.

But Tuesday’s announcements, Doukas counters, show that while the Trump administration might be focused on creating new opportunities for coal and natural gas abroad, public and private financial institutions seem to be walking back from fossil fuel investments rather than ratcheting up those commitments.

What we’re seeing here is countries and public finance institutions and private finance institutions moving forward on climate action irrespective of what the Trump administration does,” Doukas said. “Even though the Trump administration can be damaging, their actions in this sphere are largely irrelevant.”

In the United States, several banks have faced divestment pressure over their financial support of fossil fuel projects, particularly tar sands pipelines. In the last year, a number of cities — including Seattle and Philadelphia — severed ties with Wells Fargo at least in part due the bank’s continued financing of the Dakota Access Pipeline. Wells Fargo currently has $14 billion invested in the oil and gas industry, according to the Sierra Club.

Investors and climate activists in the United States have also targeted fossil fuel companies themselves in an effort to get companies to recognize the risk that climate change poses to their financial assets. In a serious break from precedent, on Tuesday, ExxonMobil revealed in a filing to the Securities and Exchange Commission that it would be strengthening the disclosure of the risks its oil business faces from both climate change and climate policies.

“It’s interesting that these things happened at the same time,” Ceres’ Logan said of the World Bank announcement and the Exxon announcement. “I think they are separate instances driven by the same set of concerns. Taken together, they represent what could be a real tipping point in the investing community’s attitude towards fossil fuels as an investment. It’s another sign that the biggest investors in the world are really worried about climate change.”