Green Financing Tops Fossil Fuel Investment for First Time
In welcome clean investing news to kickstart 2023, more money has been directed to green energy projects than fossil fuel initiatives for the first time, Bloomberg reports.
Around US$580 billion was raised for renewable energy and other environmentally-friendly ventures last year, while oil, gas, and coal industries received a smaller US$530 billion, data compiled by the business media company found.
Bloomberg also revealed that green bonds and loans are generating more revenue for bankers, who are earning an estimated US$3.3 billion from fees related to clean finance deals, compared to US$2.5 billion earned from lending in the highest-polluting energy sectors.
According to Maria Loyez, chief customer officer at sustainable investment firm and B Corp Australian Ethical, the new data is a good sign, echoing similar trends in the Australian financial landscape.
“It’s great to see because the US is a big market and it can have a big influence on overall net zero [emissions],” Loyez told Pro Bono News.
“We’re seeing the same trends in Australia. We’re seeing a continued increase in demand from consumers for sustainable and responsible investing, and we’re certainly seeing that in our business too.”
Green bond issuance is on the rise in Australia, with the Treasury Corporation of Victoria issuing $2.5 billion in green and sustainability bonds in the last financial year, up from a $300 million offering in 2016.
Meanwhile, the Responsible Investment Association Australasia reported that Australia’s responsible investment market holds a record $1.5 trillion in assets, a figure that is expected to continue to grow. Climate change and sustainability are among the top investment areas for Australians.
“There’s no longer any debate about climate change, and there’s no longer any debate about what we need to do to fix it, [and] I think people are understanding that,” continued Loyez.
“Our view is that, ultimately, fossil fuels are going to be stranded assets because we won’t be able to continue to use them or invest in them, and their valuation is going to change very quickly as a result.”
However, Bloomberg importantly suggests green financing may not have actually increased—instead, fossil fuel companies are turning away from capital markets and looking to alternate sources, including private equity, to raise money.
Furthermore, while climate-friendly investments may be popular in the current economic climate, banks have still raised almost US$4.6 trillion for oil, gas, and coal companies since the 2015 Paris Agreement, while green loans and bond sales generated half this amount (US$2.3 trillion).
Loyez says companies are readily misusing ESG factors and how these are communicated to the public, which contributes to the rise of greenwashing and other unethical practices.
The 2022 Global ESG Monitor report found that Australian companies are lagging when it comes to ESG transparency and that the ASX 50 has the lowest percentage of companies reporting sustainability-focused performance targets.
“ESG is used very broadly, I think, in Australia and globally. Companies using ESG integration only as a tool is quite misleading for consumers, who may expect that they are investing in cleaner energy or that they won’t be invested in things that don’t align with their values.
“I think it’s really clear that the IPCC [Intergovernmental Panel on Climate Change], all of the scientists, have spoken, and we can no longer afford to invest in any fossil fuel projects or continue to use fossil fuels.
“We need to create a transition really quickly now, and so continuing to invest in fossil fuels is just no longer an option if we’re to keep within a 1.5-degree aligned world.”
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