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A Climate Crisis Fueled by Finance

June 28, 2022

In the effort to curb Earth’s rising temperatures, a lot of focus is rightly placed on combating the extraction and use of coal as a source of energy. Made almost entirely of carbon, coal is the dirtiest form of energy by far, producing carbon dioxide emissions at nearly double the rate of natural gas. Despite these well-known environmental impacts and a long history of exploitative labor required to extract and process coal, this ancient fossil fuel drives an $800 billion industry, generating some 40% of the planet’s electricity.

With the climate crisis upon us, can the massive, capital-rich coal industry, which still seems to operate with impunity, ever be dismantled? The answer is likely yes, over time. But, as several Goldman Prize winners know, the best means of stopping coal extraction and production is to stop its flow of cash at the source.

Cutting Coal’s Purse Strings

Let’s be clear: coal doesn’t extract itself. In 2021, the world’s biggest banks cut a check for $742 billion to the fossil fuel industry. North America stands on the frontlines, with JPMorgan Chase, Wells Fargo, Scotiabank, and RBC increasing their fossil-fuel financing over 2021, despite emission reduction targets for the sector. In the six years since the Paris Agreement was adopted in 2015, the world’s largest commercial and investment banks have sunk some $3.8 trillion into fossil fuel investments.

That said, efforts to curtail the coal financial sector aren’t without progress. Though 33 of the world’s 60 largest financial institutions increased their fossil-fuel lending from 2016 to 2020, others are taking firm steps toward change. France’s Crédit Mutuel was the first to completely divest from the industry—investing zero dollars in 2020—and other European banks like Deutsche Bank and Credit Suisse are following similarly hopeful trends.

Several Prize winners have been key to these vital first steps: Heffa Schücking (Germany, 1994) and her organization, Urgewald, focus on halting finance for destructive coal mining in Colombia, India, and the United States; Lucie Pinson (France, 2020) played a major role in persuading French banks to stop financing new coal projects; and Kimiko Hirata (Japan, 2021) pressured the Japanese government to shut down over a dozen coal power plants—monumental progress in a country that is the fifth-largest carbon emitter in the world.

And then there’s Australia, the world’s largest producer of coal by value—for now. 2022 Prize winner ​​Julien Vincent, formerly of Oxfam and Greenpeace, founded Market Forces in 2013 to target the country’s coal-backing goliaths. Because of his aggressive activism, Australian banks Westpac, ANZ, NAB, and Commonwealth Bank vowed to divest from coal projects. Major Australian insurers Suncorp and QBE Insurance Group followed suit—there are now no Australian insurers willing to underwrite new coal projects. Combining forces, Julien and Kimiko Harata are currently taking on Japanese companies reliant on Australian-produced fossil fuels. With purse strings tied, both Japan and Australia must adapt to a cleaner future.

Are Your Assets Carbon-Friendly?

While few of us will individually impact the finance industry’s policies on climate change, we can collectively move mountains by evaluating where we place our assets—banking, stocks, mutual funds, pension funds, insurance carriers—and push our financial institutions to divest from pro-coal companies and, instead, invest in a greener world.

First off, evaluate any carbon assets you may have—are you invested in coal, oil, and gas reserves or companies supporting and profiting from the fossil fuel industry? As Julien argued to Australia’s biggest financial lenders, these stranded assets could prove harmful, liable to lose value over time.

Second, consider moving your portfolio toward climate solutions, like renewable energy. For those who want assistance, many organizations offer various types of socially responsible investing. Beyond being a smart financial move—and an ethical one—when it comes to the fight against climate change, money talks.

Support Julien’s organization, Market Forces, and follow them on Twitter to learn how you can support his work.

About the author

Jacqueline Kehoe

Jacqueline Kehoe is a freelance writer and photographer whose work focuses on citizen conservation and public lands. She has been published in National Geographic, Sierra, Lonely Planet, and more.

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