How can we reorient the financial system away from fossil fuels? We spoke to Umme Hoque of The Sunrise Project to find out!
By Thomas Ansell
The Sunrise Project’s new Finance Action Organisers Network initiative aims to shift global finance beyond fossil fuels, cut off new fossil projects from the global financial system that supports them and hasten the transition to renewable energy rooted in climate justice
The Sunrise Project, a global network of campaigners founded in Australia in 2012, grows the power of social movements to try and shift the global economy away from fossil fuels and hasten the transition to renewable energy. By supporting global campaigns with groups and activists around the world, and through a mixture of cajoling, supporting, research, and pushing certain practices into public view, their campaign aims to effect changes in public opinion, corporate practices, and global emissions.
To mark the launch of a new initiative focused on growing and supporting grassroots power against financial institutions to shift beyond fossil fuels, we spoke to Umme Hoque, Global Hubs Organising Manager at The Sunrise Project, to find out just how big the task will be to shift finance to a more sustainable trajectory.
To give an idea of the scale of the issue, how skewed towards fossil fuels is the current (global or Western) finance system?
“Unfortunately, the whole of the global finance system is highly skewed toward fossil fuels”, says Umme. “Through effective campaigns and actions, we’ve managed to shift billions away from these investments, but the simple answer is it’s not enough: it’s not enough in the timeframe we need to avoid a disastrous future, and it’s not enough to help those already being impacted by climate change, especially those most marginalised in their communities.”
For some context: from 2016 to 2020, the world’s 60 largest banks invested 3.8 trillion USD into fossil fuel projects and companies, says Umme. This can be compared to, for instance, the GDP of France in 2021 (2.9 trillion USD).
“But at the same time, asset managers are investing billions, too – like Vanguard, which has $300 billion invested in fossil fuels. Private equity is also pouring billions into fossil fuels, and the bond market is where fossil fuel companies can find more money and investment if they can’t find it through a bank or other investment”, says Umme.
Is there a particular sub-sector of the financial world that is particularly focussed on new fossil fuel investments, despite various warnings of the (further) environmental damage they will cause?
“Unfortunately the whole of the finance world is invested in fossil fuels, even some parts that claim they are not. This includes private banks, private equity entities, asset managers. Even insurance companies – who then are also insuring homes and businesses that are being lost to climate disaster – are still investing in fossil fuels.”, says Umme. “And the power of financial institutions can feel immense: they exist on a global level; have power within national and international governments, and even have the capacity to influence the media.”
But, as Umme says, “activists around the world know that if we follow the money back to financial institutions and run strategic campaigns against them, we can stop investment in fossil fuels and fossil fuel projects and instead hasten the transition to a renewable future rooted in climate justice.”
This is precisely what the Finance Action Organisers Network is set up to support, says Umme. “It helps connect local fights to global struggles, supports people to build their capacity to understand how financial institutions are connected to climate change, and provides opportunities to get involved in campaigns, actions, and activities to address this.”
How can a climate action hub help pressure financial organisations into changing their strategies?
As an experienced campaigner and organiser, Umme notes that pressure has to come on multiple levels, and from various parts of society, and Finance Action can help individuals and groups do that: “taking action and asking more of our financial institutions is integral to ensuring they know that they can’t and shouldn’t invest in fossil fuels. You can do this in a number of ways: like calling your bank manager or pension fund to ask if they’re invested in fossil fuels and explaining why they shouldn’t be, joining a local campaign against financial institutions in your community, or even attending actions or protests.” Every action matters, adds Umme: “these financial institutions are taking your money and investing in harmful fossil fuels that will impact all of us and are destroying communities. The more of us they hear from, the more likely they are to change their policies, shift their investments, and adapt their strategies.”
And, a multi-level and multi-stakeholder action plan can work. “Just last year there were announcements from various companies saying they’d no longer invest in fossil fuels or they’ll exit oil and gas, like bank HSBC or insurance company Munich RE. These announcements are only possible through sustainable pressure from all of us. And after we win the announcement, we will have to keep an eye on these companies to ensure they’re upholding these promises since it’s so easy for them to greenwash.”
What is the role of (national or supernational) governing bodies in decarbonising finance?
Aside from pressuring organisations and companies to change from the inside, regulation has a very important role to play in making sure we have a decarbonised economy across the world in the future.
“Financial regulators, central banks, and international standards setters have a pivotal role to play in not only guiding the financial sector through decarbonisation, but ensuring long term financial stability”, says Umme. “This has to take place in a world where finance is contributing to worsening biodiversity loss, water scarcity, and climate change–a concept known as double materiality. Governing bodies must adopt a precautionary approach to environmental risks to prevent radically uncertain outcomes. This means using financial regulation to require all financial institutions disclose credible transition plans based on scientific evidence and supervising how financial institutions are achieving their targets”, she says.
“The first step in any such transition plan must be ending fossil finance, which can be achieved by setting one-for-one capital requirements on new fossil projects, going so far as to putting limits on lending to environmentally destructive projects and companies.”
“Supranational governing bodies, such as the Basel Committee on Banking Supervision, can lead the process of regulating finance through the transition to a decarbonized economy, by setting guidance on increasing risk weights for new and existing fossil fuel exposures and introducing environmental systemic risk buffers. Central banks also have a role in incentivising and increasing lending to sustainable activities through green discount rates, though monetary policy must be accompanied by fiscal policy planning for the economy of tomorrow”, says Umme.
To what extent should we accept claims of financial companies to be focussing on ‘green solutions’?
Umme urges some caution on unsubstantiated claims: “Unfortunately we know that greenwashing is real. Financial institutions are notorious for claiming to be implementing green solutions when, in fact, they are actually still investing in fossil fuels and in energy systems that harm all of us.”
“To ensure a renewable future rooted in climate justice, we need to not only take on the big banks, insurance companies, private equity companies, and other institutions and ask them to not invest in fossil fuels – we need to keep building our power and keeping an eye on them because it’s too easy for them to make false commitments and then keep investing in the systems harming all of us and destroying Indigenous and frontline communities when they think we’re not looking.”
To find out more about the initiative, check out the website. The website is an invaluable resource, and you can learn more about how financial institutions are involved in financing fossil fuels, what they should be doing, get involved in local or global campaigns, build your skills on organising and campaigning, and connect to your local Finance Action hub. You can also sign up to the initiative’s newsletter to get the latest news, actions, and opportunities to get involved.
Photo by Eelco Böhtlingk on Unsplash