Climate change, both man-made and exacerbated and naturally occurring, is one of the monumental existential threats and concerns and, for many, the defining issue of the 21st century. Numbers concerning temperature thresholds and the amount of time available to act on various issues and impending catastrophes are thrown around all the time.
While it can be stressful and confusing navigating the science and politics behind it all, one thing is for certain: the massive infrastructural, technological and economic changes will require spending and investment on a scale perhaps never before seen in human history, and financial institutions will play an important role in all of it.
They Are Heavily Invested in the Fossil Fuel Status Quo
The world's largest financial institutions are still heavily invested in many of the world's most prominent fossil fuel companies and economies. The biggest banks in all of the advanced countries have billions of dollars capitalizing oil and gas projects and supply chains around the world. In order to transition away from this paradigm and towards a large scale sustainable and renewable energy future, financial institutions are going to have to make sweeping changes to how they invest in energy.
This is something many banks and financial institutions recognize, with a number of sustainability-minded banks already trying to lead the way. A combination of continued divestment from fossil fuel companies and increased investment in renewable and green energy companies is undeniably important. In addition to this, the proper incentives for large fossil fuel companies to reorient their business models and operations towards more sustainable energy-related endeavours must also be put in place.
Developing Countries Can't Transition on Their Own
An unfortunate but glaring fact of life when it comes to economic development in the global south is that to achieve rapid and humane development requires the goodwill of the already advanced post-industrial countries of the world. Governments in places throughout the global south, from Africa to Latin America, are plagued by debt, corruption, and bad governance (among other things). In order for these countries to stand a chance of converting substantial portions of their economy over to green and renewable energy, global financial institutions will be called upon to provide capital, and to do so with terms that don't force austerity and misery on already immiserated people in the process.
Favourable loan conditions on infrastructure projects in, for example, countries transitioning away from things like coal and wood fuel, or trying to upgrade their public transportation and urban planning to eliminate cars and dilapidated diesel busses from the road, must be made a priority. Many banks around the world have committed to a joint pledge for a "green recovery" following the pandemic.
Governments Are Paralyzed
Governments around the world, despite being involved in more negotiations and talks surrounding climate change than ever before, are unable to make meaningful reductions to global greenhouse gas emissions--which are at an all-time high. The private sector, which has been responsible for so much of the environmental destruction and global warming worldwide, looks as though it will also be responsible for facilitating a major paradigm shift. Banks and financial institutions, including both national and private ones, must lead the way.
Conclusion
Global capital, in many ways, got humanity into this mess, and it looks like it will be, in no small part, up to them to lead and finance our way out. By helping make transitions away from fossil fuels and towards renewable sources of energy, more sustainable energy infrastructure worldwide, and partnerships with struggling and indebted governments around the world, our financial institutions are a key part of the solution.
