One of the world’s biggest financial services companies is both dumping investments and ending insurance for controversial US oil pipelines, taking fossil fuel divestment to a new level.
Axa is also quadrupling its divestment from coal businesses and increasing its green investments fivefold by 2020. The moves were announced at the One Planet Summit in Paris, called by the French president, Emmanuel Macron, to accelerate the use of global finance in fighting climate change.
Most existing fossil fuel reserves cannot be burned without helping to cause dangerous climate change, and proponents of divestment argue this makes the most polluting fossil fuel companies bad investments on both financial and ethical grounds.
If the world’s governments fulfil the Paris climate change agreement by slashing carbon emissions, many coal, oil and gas reserves could become worthless, potentially wasting trillions of investors’ money. This risk of stranded assets is taken seriously at the highest level, including the Bank of England, World Bankand the G20’s financial stability board.
Axa was one of the first major financial companies to start selling off coal investments in 2015, with a €500m divestment. But on Tuesday the company raised this to €2.4bn, taking out 100 companies that derive more than 30% of their revenue from coal. It also raised its goal for investments in green energy and buildings from €3bn to €12bn by 2020.
However, Axa has broken new ground by not only divesting from 25 tar sands companies but also from three major pipelines needed to deliver their oil to market and by ending the insurance it provides, a total of €700m. The company declined to name the pipelines but it is understood they are major pipelines in North America.
Tar sands in Canada contain a huge amount of oil but require a lot of energy to produce, making the fuel particularly polluting. Pipelines from Canada into the US, such as Keystone XL and Dakota Access have been the focus of high-profile protests, particularly at Standing Rock Native American reservation in North Dakota. The French bank BNP Paribas and ING in the Netherlands have both recently divested from tar sands.
On top of their heavy carbon emissions, tar sands pose other problems, said Thomas Buberl, the CEO of Axa: “They often present acute human rights issues, if you think about population displacement and also the local pollution they produce.” In November, the Keystone pipeline leaked more than 200,000 gallons of oil in South Dakota. “The pipelines will also be stranded assets at some point, so we don’t want to invest.” Buberl said.
Buberl said his company was disposing of coal and tar sands investments for both business and ethical reasons. Without big cuts in global carbon emissions, the world is set for 4C of warming, which governments accept would bring “severe, widespread, and irreversible impacts”.
“An increase of 4C is not sustainable and therefore also not insurable.” said Buberl. “And as the father of two children, I really want to do the most I can with the company I am leading to not get into a 4C world.” He said the company did not expect any change in the returns it makes on its remaining investments.
Bill McKibben, founder of campaign group 350.org, said Axa’s tar sands move was significant: “This is a major development. It indicates that some of these big firms are beginning to connect the dots to understand the big, wretched climate change picture. It boggles the mind that anyone is still willing to finance and insure new tar sands pipelines – it’s good to see that at least a few are waking up.”
Ellen Dorsey, executive director of the Wallace Global Fund, said Axa’s announcement showed large institutional investors are starting to move rapidly to get out of fossil fuel investments and into green investments. “The good news is that they will profit on both sides of ‘divest-invest’ from doing so.” she said.
The total value of the investment funds committed to fossil fuel divestment was more than $5tn in December 2016, the latest global estimate available, and includes the world’s largest sovereign wealth fund, owned by Norway.
However, some banks are still investing in coal plants, according to new research from campaign groups, which estimated that $275bn was channeled to companies planning to build new coal-fired power stations since the global Paris agreement was signed in December 2015.
Many of the banks are Chinese, said Yann Louvel, Climate and Energy Coordinator at BankTrack: “We have seen China take important steps to begin reducing its domestic coal use. It now needs to rein in the money going to Chinese coal expansion overseas.”