As the world witnessed the start of the 29th climate summit in Azerbaijan (11-22 nov), the urgency of addressing climate change is clearer than ever. With rising temperatures, warming oceans, extreme weather events and increasing biodiversity loss, the stakes at this conference are high.
The focus is on how to finance things - from renewable energy to climate adaptation. But after more than 22 years of international negotiations on climate, a lack of political will, boldness and unanimity means there are still no binding agreements on phasing out fossil fuels such as oil, coal and gas.
This while fossil is the largest human-driven contributor to climate change, and according to the most recent Harvard University study, 1 in 5 deaths worldwide are caused by air pollution from fossil fuels. And things can be different, as evidenced by the Montreal Protocol, through which 198 countries have committed since 1987 to eliminate the use of ozone-depleting propellants.
The global financial sector holds a key that cannot be underestimated. As much as many financial institutions tout their investments in renewable energy as evidence of their sustainability strategy, and make promising climate promises, these efforts are often undermined by the simultaneous large-scale financing of oil, gas and coal projects. Thus, the billions continue to flow unimpeded into the oil and gas industry. In 2023 alone, the financial sector provided €650 billion in financing in fossil fuels, either directly or through capital markets.
This ambiguous strategy - financing both fossil and renewable - is not only contradictory when it comes to the energy transition, but in my view fundamentally flawed. The financial sector has a central role to play, not only as a financier but also as a steward of future economic stability. The necessary acceleration of the sustainability of our economy and society will not be possible as long as the financial sector continues to support industries that achieve the exact opposite.
A common argument used in the lobby against fossil phase-out is that new investment in exploration and production of oil, gas and coal will remain necessary for the foreseeable future to prevent us from falling into an energy crisis. However, scientists confirm that there is already enough oil, gas and coal in production to continue meeting needs as the world shifts to renewable energy. There is enough renewable energy potential in every region of the world to ensure access to energy for all, and in addition, rich countries can save a great deal of fossil fuels by using less energy, or use it differently.
Investment in new exploration and production of oil, gas and coal inhibits the energy transition by continuing to encourage fossil fuel use, and these investments do not go to clean technology. And as part of a fair and equitable energy transition, richer countries will indeed have to support less prosperous countries in their transition. This will require vision, courage and unity from all of us, and we owe it to each other to secure a livable planet for future generations.
The climate summit in Azerbaijan offers a new opportunity for the global financial sector to express a clear commitment: the phasing out of investments in fossil fuels will be accelerated in the coming years in favor of scaling up investments in renewable energy. This transition will take time, I am very aware of that, but first and foremost it requires the principled choice to accelerate the phase-out of fossil fuel financing, starting now.
As leaders in the financial sector, we owe it to ourselves and future generations to actively contribute to a livable climate on a livable planet, and phasing out the use of fossil energy plays a crucial role in this. In addition, it also makes great financial sense. The global energy landscape is changing rapidly, with renewable energy technologies becoming increasingly profitable. In many regions, renewable energy is already a better investment than fossil fuels. As economies around the world embrace sustainability, fossil fuel assets are at risk of being stranded. Institutions that fail to recognize this shift could suffer large financial losses over time as the world shifts to greener alternatives.
It is time for the global financial sector to take responsibility with actively shifting global funding flows from fossil to renewable energy. As a financial sector, we can make an important contribution to a livable planet for future generations, let's embrace that responsibility together at COP 29.