The Climate Needs Your Commitment – Make your Capital Matter

2018-09-07

Numerous climate conferences taking place this September are expected to influence international climate change solutions, and how to finance those solutions, for years to come. These include the U.N.-sponsored Climate Change Conference, the Global Climate Action Summit and Climate Week (including the One Planet Summit).

The outcomes will help focus minds ahead of the 24th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP24) being held in Poland this December, where leaders are expected to finalise rules for implementing the Paris Agreement. A key topic of discussion at all of these gatherings will be the role of private capital in solving climate change, with divestment from fossil fuels being a part of the debate.

In this piece, SFi discusses how both public and private capital will be required to meet climate obligations. We look at DivestInvest as one strategy that investors can join to accelerate the clean energy transition, the current divestment status of Hong Kong, and finally, some practical tools for individuals who wish to take action.

The Challenge – Private and Public Capital Needed

The Paris Agreement is the only coordinated international attempt to reduce the amount of carbon dioxide in the atmosphere to prevent warming temperatures, extreme weather, and other climate change-related crises from becoming more catastrophic on a worldwide basis. Its stated goal was to stop global warming at no more than 2 degrees Celsius above pre-industrial temperatures. To reach that target, US$320 billion in low carbon and energy efficiency investment is needed.

We know public investment alone is not enough, and significant sums of private sector capital will be required to close this gap both globally and locally. Investors face a historic opportunity to support this transition to a low carbon economy and help governments meet their climate promises. Reaching these goals will require a radical shift of investments away from the burning of fossil fuels (which releases greenhouse gases such as carbon dioxide, and sulphur dioxide, which induces acid-rain) and toward renewables and energy efficiency.

The Solution – Divestment From Fossil Fuels

Fossil fuel divestment means withdrawing investments from companies, stocks, funds, and industries that contravene climate solutions. It makes a symbolic statement against unsustainable practices. Divestment campaigns began on college campuses in 2011, with students demanding their college endowments divest from energy sources driving climate change. While their call to action was primarily rooted on the moral argument that educational institutions should not be supporting or profiting from industries that harm the climate, the economic logic is equally powerful.