Wall Streets mål: Finansiera kolkraft – och tvinga fram grön energiomställning

Some banks and investors are flirting with new models for bringing the world’s dirtiest commodity back into mainstream finance.

Since the 2015 Paris climate agreement, “blacklist coal” has become a mantra across much of the finance industry. Banks have stopped providing loans to coal projects, insurers are backing away, and investors are pulling out. Yet over the same period, demand has soared to a record high, helping triple prices for the world’s dirtiest commodity.

Against that backdrop, financiers and nonprofits from around the world are teaming up to develop alternative strategies. The first step, they say: Bring coal back into mainstream finance.

The goal is to develop accounting methods that allow lenders and investors who fund coal to document that they’re helping producers transition to a greener business model or nudge mines and coal-fired plants into early retirement. If they can demonstrate that their financial support leads to less pollution than business-as-usual would, they’d get to claim the benefits on their carbon ledger.

Proposals include so-called transition credits, a type of carbon offset that the Monetary Authority of Singapore wants to link to the phaseout of coal-fired power plants. Another idea, from the Glasgow Financial Alliance for Net Zero (Gfanz), in cooperation with big financial institutions and technical experts at nonprofits, would be an experimental metric called expected emissions reductions, or EERs. And the Rockefeller Foundation is building what it calls a coal-to-clean-carbon credit program. Tools such as EERs would help “financial institutions move beyond backward-looking carbon emission data,” says Lucian Peppelenbos, a climate strategist at Dutch asset manager Robeco.

The Gfanz proposal, which seeks to calculate finance firms’ contribution to decarbonization in the real economy, would apply to climate solutions such as wind projects or solar installations, big polluters like cement or steel producers that have a credible plan to transition to greener activities, as well as assets that likely need to shut down altogether, such as coal-fired power plants. Investors can claim a share of the projected emissions reduction, which helps them account for the short-term emissions spike on their books that comes with investing in the polluter while it pursues a greener strategy. (Gfanz is co-chaired by Michael R. Bloomberg, the founder of Bloomberg LP, and Mark Carney, chairman of Bloomberg’s board.)

The efforts seek to quantify how a company’s emissions profile might look in the future, instead of relying solely on what it looks like today. That would allow investors a better sense of those that are doing the most to drive change, says Manuel Coeslier, climate lead at Mirova, a French asset manager. Mirova is working with Robeco to help investors measure emissions saved thanks to financial backing of the likes of renewable energy providers and electric-vehicle manufacturers. Given the myriad questions surrounding the use of avoided emissions accounting to underpin offsets, documenting this in a transparent and verifiable way will be key to avoiding bogus green claims. Such a strategy “would help the market a lot in understanding where efforts lie” to decarbonize the economy, Coeslier says.

Climate activists remain skeptical, saying Big Finance is coming up with another complex array of instruments that will be touted in reports and traded on commodities platforms without making any measurable difference in the real world. Meanwhile, big polluters will get better access to financing. “There is a fundamental problem with the EER approach, in that it’s based on an unknowable counterfactual baseline,” says Paddy McCully, senior analyst for energy transition at Reclaim Finance, an environmental nonprofit.

Maia Godemer, an analyst at BloombergNEF in London, says that there’s clearly a need to provide decarbonization incentives for heavy emitters but that creating new transition-specific instruments or accounting methods isn’t necessarily the best way forward. Debt markets have already come up with tools such as sustainability-linked bonds that allow investors to finance polluters working to cut their emissions while avoiding any public blowback. Labeling certain products as transition instruments could “pose greenwashing risks,” Godemer says. “It is likely to end up rubber-stamping entire technologies that are only appropriate for transition in specific situations.”

Proponents of the avoided-emissions approach say what they’re ultimately seeking is to deter a situation in which investors successfully decarbonize their portfolio, but not the real economy—or the atmosphere. Curtis Ravenel, a senior adviser at Gfanz, says the concern is that focusing too much on financed emissions—the greenhouse gas pollution enabled by lending and investing—could discourage investment in the very companies that need to change but lack the resources to effectively do so. “You’ve got to go where the emissions are,” he says, “and try to bring those down.”

For more articles like this please visit us at bloomberg.com