The European Investment Bank (EIB) recently announced that it would be phasing out investment in fossil fuel companies by 2021. The EIB is the biggest public lender globally and the move was celebrated by those within the banking industry and the environmental movement. It sends a clear message that markets are moving away from fossil fuels and towards renewable energies, with the EIB positioning itself as the leading ‘Climate Bank’. The President-elect of the European Commission, Ursula von der Leyen, commended the transition and, last week, the European Parliament declared a ‘Climate Emergency’. Two moves that signal Europe aims to take the reigns as leader of climate action, as other world powers shirk the responsibility.
Cutting financial flows to fossil fuel companies is a necessary step in the transition to clean and renewable energy. Less money in the bank for fossil fuel companies means that less exploration projects will secure funding and less oil rigs, coal plants and fracking-infrastructure built. As Bill McKibben outlines in his essay; “Money Is the Oxygen on Which the Fire of Global Warming Burns”, this will ultimately lead to fossil fuels being kept in the ground. McKibben, who is the founder of 350.org, has long been campaigning for divestment in the fossil fuel industry. He outlines the three financial sectors that need to divest; banking, asset management, and insurance. Once the purse-strings are cut and these companies have to self-fund to insure themselves, they will not be able to survive on financial reserves for long. There are also Government subsidies to think about, but that would require a whole other article.
The financial industry is conservative and calculated in nature, and when it begins to make large changes the whole world takes heed. To stop investing in fossil fuels is to signal the beginning of the end. Closer to home, AIB in Ireland is positioning itself as the ‘Green Bank’ of Ireland. It has launched a ‘Green Bond Framework’ whereby it will greatly increase the investment available for green projects, and it has also introduced a lower green mortgage rate for houses that meet the highest energy-efficiency standards.
Critics of the EIB’s decision to move away from fossil fuels have said that 2021 is too far away and that in the meantime, new fossil fuel projects can be funded which would lock the European Union into a ‘dirty future’. Angela Merkel also voiced her concerns that the EIB would not fund natural gas projects as a transition fuel on the way to renewables. This is certainly the beginning of something – but it remains to be seen how long it takes to reach the end.
Photo: Ian Sharp (Flickr)
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