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New Financial Conditions, Same Climate Calculus

While Russia’s war in Ukraine has driven up energy prices and thus fossil-fuel stocks, the case for aligning investment strategies with the Paris climate agreement is as strong as ever. If financial institutions want to show that they are serving their shareholders’ long-term interests, they will act accordingly.

NEW YORK – In its most recent assessment, the Intergovernmental Panel on Climate Change offered a comprehensive outline of what it will take to keep global warming below 1.5° Celsius, relative to pre-industrial levels, in line with the 2015 Paris climate agreement. The bottom line is simple: Greenhouse-gas emissions must peak by 2025.

To achieve that goal, financial flows must rapidly be redirected from fossil fuels toward renewable energy. In its Net Zero by 2050 report last year, the International Energy Agency made clear that, “There is no need for investment in new fossil-fuel supply in our net-zero pathway.”

But fossil-fuel financing has continued. JPMorgan Chase, a bank that uses IEA modeling and data for its own “net-zero” commitment, ended up supplying the fossil-fuel industry with $61.7 billion last year. And this year, Russia’s war in Ukraine has caused fossil-fuel stocks to surge, even while equity markets overall approach bear territory.

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