Unleashing the Climate Market
Owing to years of grassroots mobilization and the rise of renewables and low-carbon assets, financial markets are finally shifting gears to account for the inevitable decline of fossil fuels. But to make the most of the current moment, policymakers must heed the financial industry's call for clear standards.
WASHINGTON, DC – Progress against climate change has long crept at a snail’s pace, and the costs of inaction are increasingly clear to see. Hardly a week goes by without a natural disaster or an extreme weather event that destroys the lives and livelihoods of vulnerable populations in the developing world. Among the latest horrors is a devastating flood in India, owing to glacial melt, and the wave of Category 4 hurricanes that struck Honduras in November.
With a per capita carbon footprint that is 4-5 times larger than the average low- or middle-income country, the United States is deeply implicated in these tragedies. Fortunately, 2021 is shaping up to be a year when meaningful US climate action finally takes off, owing to a groundswell in the global financial industry. That’s right: Big Finance has started to go green as major institutional investors seek out safe, long-run returns in global markets.
Among many other positive developments, ExxonMobil, under pressure from Blackrock, the world’s largest asset manager, recently wrote down some $20 billion of its fossil-fuel assets. The New York State Common Retirement fund, with more than $200 billion under management, has announced that it will divest from fossil-fuel firms. And, as The Economist recently noted, energy firms’ share of the S&P 500 has fallen from 10% in 2011 to 3% today, reflecting not just the effects of the pandemic but also investor “gripes beyond COVID-19.”