Opinion | Investors are leading the climate change charge towards zero emissions and cleaner fuels while governments lag behind

Financial giants are redirecting massive money flows away from fossil fuels as slow movers report losses. But trillions of dollars in carbon assets remain on investors’ balance sheets

More needs to be done, by both financiers and governments, and next month’s UN Climate Action Summit is an opportunity

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An Icelandic girl at the site of Okjokull, Iceland's first glacier lost to climate change, on August 18. To complete the transition from fossil fuels requires drilling down to the core of the global economy. Photo: AFP

Published: 3:30pm, 1 Sep 2019Updated: 9:10pm, 1 Sep 2019

Some of the most influential players in the global economy are spearheading the shift towards a clean, green, emissions-free world, even while key governments stand idle. Financial giants from Europe, China, Japan, the United States, Australia and elsewhere can see the looming risks and rewards, and they are not waiting for policymakers to signal what needs to be done.

By immediately banning new fossil-fuel investments, labelling clean and dirty energy producers, and dumping unappealing stocks, the financial industry is redirecting huge money flows from fossil fuels to low-carbon technology.

Such decisions can ripple across economies. Consider, for example, the split between state and private energy finance in India. According to the Delhi-based Centre for Financial Accountability, primary finance for coal-fired power plants dropped by 93 per cent between 2017 and 2018, while finance for renewables rose by 10 per cent. Loans for coal projects last year mostly came from government-controlled institutions, whereas three-quarters of renewables financing came from private banks.

In Japan, banks and traders are abandoning coal projects in favour of renewables, even though the government resisted setting a phase-out date for coal-powered energy. Three Japanese coal-plant projects have been cancelled or delayed this year.

Globally, the International Energy Agency (IEA) reports investments in coal-power plants hit a century low last year, with more coal generators retired. This trend will become more pronounced as more financial firms shift from fossil fuels. Consider the headlines since March.

Norway’s sovereign wealth fund is divesting US$13 billion in fossil-fuel stocks. Japan’s Mitsubishi UFJ Financial Group has stopped financing new coal-fired power projects. Chubb became the first major US insurer to ban coal coverage and Suncorp the last Australian insurer to end coverage for new coal-mining and coal-power projects.

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