Danielle Fugere, the president of As You Sow, a nonprofit focused on shareholder advocacy, emphasizes the need for banks to disclose their climate-related actions. She believes understanding these actions is crucial for holding banks accountable for their climate goals. Laws like California’s highlight how fossil-fuel-driven climate change causes financial instability, ideally leading to less support for projects that worsen this crisis.
However, simply asking banks to report their emissions and climate risks won’t fully protect us from the effects of global warming. The International Energy Agency’s 2021 report warns that to keep global warming below 1.5 degrees Celsius (2.7 degrees Fahrenheit), we can’t build new oil, gas, or coal infrastructure. Patrick McCully from Reclaim Finance advocates for stronger action, urging legislators to push banks to cut funding for fossil fuels.
“These companies act against humanity’s interests,” McCully stated, stressing the need for change.
While some suggest a ban on financing fossil fuel projects, experts point out this idea can be complicated to implement and may face legal hurdles, even in progressive states. For instance, attempts to restrict natural gas in new constructions have met resistance from industry groups.
Ann Lipton, a business law professor at Tulane University, suggests another approach. Lawmakers could require insurance companies to consider climate risks in their policies, making it harder for fossil fuel ventures to get coverage. “We want banks to finance safer projects, but they tend to back what’s guaranteed to be profitable,” Lipton said. It falls on society to shift what is considered profitable.
Another proposal is for banks to create clear decarbonization plans. This could indirectly limit investment in fossil fuels. Fugere explains that if a bank sets a target for “net-zero” emissions by a certain date, it must take steps to phase out fossil fuel financing. If a bank aims to align with the world’s goal to limit warming, it cannot support expanding fossil fuel operations.
As the climate crisis intensifies, it’s crucial for banks and financial institutions to be transparent about their practices and commit to sustainable financing. Society has a role in shaping these financial priorities to support a healthier planet.
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