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Renewable Finance

Finance houses join the rush toward supporting the energy transition. Earlier this year, State Street, one of the world’s largest asset managers, threw its support behind a shareholder petition urging Japanese bank Mizuho to disclose more information about how it is aligning its investments with the Paris agreement on climate change. Closer to home, Boston-based State Street joined a shareholder proposal asking JPMorgan to report how it plans to reduce greenhouse gas emissions associated with its lending business in alignment with the Paris accord.As banks this year have drawn fire from asset managers — themselves sometimes accused of greenwash — over the risks of inaction, the banks are now putting pressure on giant oil-and-gas companies to accelerate their renewable strategies. The European Central Bank and other regulators are also starting to scrutinise what climate change risks are under-appreciated by banks. For banks, the energy transition is a massive opportunity. Coal, oil and gas account for about 65 per cent of electricity generation, according to a Morgan Stanley report. To comply with the Paris agreement’s goal of limiting man-made global warming to no more than 2 degrees centigrade, $14tn in clean, renewable energy will be needed over the next 30 years. BP, for example, will need to double or even triple its annual wind and solar investments for the next 30 years to meet net-zero carbon emissions targets. European banks are leading the pack globally. In 2018, BBVA, BNP Paribas, ING, Société Générale and Standard Chartered together pledged to steer their portfolios toward the Paris agreement’s goal. The Dutch bank ING, for example, has increased its renewable power generation financing in 2019 while reducing its exposure to coal power plants by 22 per cent. As a result, renewables accounted for 59 per cent of power generation lending outstanding at the bank at the end of last year.

FT 27th Oct 2020 read more »

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