Why is global investors’ fossil fuel divestment not having the desired effect on China’s carbon emissions?
- More than 1,000 institutional investors have committed themselves to divest trillions from fossil fuel companies and stocks
- But institutional investors are unable to pressure Chinese miners and power producers as they do not rely on foreign funds
Western institutional investors who have joined the coal divestment movement are finding it difficult to pressure Chinese companies to reduce their carbon footprint despite Beijing’s commitment to the Paris Agreement.
Analysts say there are two main reasons for this: China is yet to implement plans to cap carbon emissions and, more importantly, Chinese miners and power producers do not rely on foreign funding.
The Paris accord sets out a global action plan to reduce greenhouse emissions and put the world on track to avoid dangerous climate change by limiting global warming to well below 2°C and pursuing efforts to limit it to 1.5°C.
“The major shareholders of Hong Kong-listed Chinese [coal and power companies] are not western fund management firms, so [their] investment restriction is unlikely to have any impact on them,” said Lucas Zhang Liutong, director at regional consultancy WaterRock Energy Economics.
But global asset management firms and investors fund are committed to the fossil fuel divestment movement, which began on US university campuses in 2011. A divestment report by Arabella Advisors released in September 2018, said that more than 1,000 institutional investors have pledged to divest US$6.2 trillion from fossil fuels, up from US$5.2 trillion in 2016.