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Coalition of big investors pushes banks to defund carbon emitters
- baryphonic 5y ago> “The problem we face today is that too many banks are failing to consider climate harm when they make financing decisions, and too much money is being ploughed into carbon-intensive activities that we so desperately need to move away from,” said Natasha Landell-Mills, head of stewardship at UK asset manager Sarasin & Partners. The question remains: how will you do activities like e.g. making steel in a "green" manner? Moving money around cannot alone answer that question; finance can only help by moving money toward new technology that can perform the jobs of the old, non-green tech. What are these investors willing to invest in to make the needed tech?
- HDMI_Cable 5y agoI'm guessing initiatives like cap-and-trade programs or carbon offsets for heavy polluters could also be done.
- lumost 5y agoMany modern steel plants already use electric arc furnaces originally developed for aluminum manufacture in the 30s and 40s. There is no inherent reason not to collocate steel plants with plentiful renewable energy. As energy is one of the primary input costs to steel manufacture, it should be practical to develop “peaker” plants which take advantage of the midday energy cost dips due to solar.
- mistrial9 5y agosee Industrial Ecology https://en.wikipedia.org/wiki/Industrial_ecology https://en.wikipedia.org/wiki/Industrial_ecology
- adrianN 5y agoSteel can use electricity for heat and hydrogen for reduction. There are some things where we don't know of good replacemets (e.g. concrete, aviation), but steel is not a good example. In any case, if we get rid of fossil fuels everywhere where it's easy (electricity, heating, mobility except for flying), then we have a lot larger budget for figuring out how to do the things where it's not easy.
- imglorp 5y agoAnd then there's the bitcoin miners who bought a natural gas power plant. Speculation drives so many evils for short term gain to a very few beneficiaries, blinded to all future impacts to everyone else. If ever there was an argument for carbon tax, here it is. https://www.archpaper.com/2021/04/greenidge-power-plant-mine-bitcoin-raising-fears-of-a-climate-crash/ https://www.archpaper.com/2021/04/greenidge-power-plant-mine...
- cies 5y agoExactly. Make pollution (incl CO2) sooooo heavily taxed that we can lower the tax on other "more wholesome" things (like income from labor and housing). And the market will solve this issue real fast. Sadly the power structures in place prevent creative thought, as those milking the cows of the status quo prevent change.
- worldofmatthew 5y agoIt would also have a worse effect on the poorest.
- gruez 5y agoThat's true of most consumption taxes, but this can be offset by giving a fixed tax credit to everyone. eg. if the median person is expected to pay $1000/yr in carbon taxes, then give them a yearly check for $1000 so it doesn't cost them extra. If they can reduce carbon on top of that, great! It's free money for them.
- andruby 5y agoBesides lowering income tax, what else could help offset this?
- fighterpilot 5y agoLower sales tax.
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- optimiz3 5y agoBanks shouldn't be put in the position of public policy making. If society thinks certain activities are desired/undesired, this can be accomplished via taxes and regulations. Financial cancel culture is a road to hell laid with good intentions.
- Analemma_ 5y agoClimate change from burning fossil fuels is also a road to hell laid with good intentions. Have you done the cost-benefit analysis on which is worse?
- MereInterest 5y agoExcept then people come out of the woodwork to say that government shouldn't be legislating morals, and that if it's really an issue investors would avoid investing in funds they find immoral. Which is exactly what's happening here.
- bradleyjg 5y agoThe right answers are leaf nodes—-either voters or consumers. If consumers act, intermediary institutions like banks will naturally follow. Ditto if the laws change.
- nullspace 5y agoI think it’s kinda weird that you exclude investors out of the leaf node, which is what is happening here.
- bradleyjg 5y agoThe big investors in this case are themselves intermediary institutions.
- fakedang 5y agoExcept in this case, consumers can't act. Can consumers vote with their wallets to prevent using technologies that are excessively polluting, say a necessary chemical which they use only indirectly, one that has a polluting manufacturing process? Can poorer car buyers opt for any thing cheaper than the currently available options? Or rather, because there are no options available for them, should they simply not use cars instead of using the polluting gasoline cars?
- gruez 5y agoBut won't other investors step in and replace them? If a coal power plant can't raise capital from these guys, they'll get it from someone else instead. Failing that, they could offer slightly higher interest rates which will surely attract amoral investors. edit: Fossil fuel divestment has ‘zero’ climate impact, says Bill Gates (ft.com) https://news.ycombinator.com/item?id=20998948 https://news.ycombinator.com/item?id=20998948
- thu2111 5y ago"Amoral" or just not convinced by the case made by climatologists for their predictions. Although many try to shut down all discussion of it, there are plenty of rational grounds for suspecting climate change related predictions are incorrect. People who believe that could invest in carbon-emitting industries without any cognitive dissonance or belief that they were being amoral, because they don't believe it's a big deal in the first place. That pushes the decision further downstream to the buyers of the power, and so on. It's a market based solution to making these decisions and weighing the evidence, which incorporates far more people and analysis power than a government department or political party can marshal. So this seems like fair game to me, or at least, preferable to the alternatives.
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- adrianN 5y agoLiterally everyone would be more than happy to hear solid evidence that our climate predictions are wrong. The scientist publishing a solid paper with that conclusion would become a hero.
- thu2111 5y agoIt would be nice if that's the case, but do you really think a global community of academics would welcome a paper with open arms that destroyed their entire life's work and careers? Come on. Plenty of papers and analyses have been published showing many wrong predictions and it's had no impact on the field whatsoever.
- testfoobar 5y agoThis is naive thinking about capital markets. Like water, capital will always find its level.
- dang- 5y agoPlease don't use HN comments for posting low-quality jokes, even if (perhaps "especially if") they're considered acceptable/appropriate for other communities.
- shrubble 5y agoNotice that there is nothing 'democratic' about this. It is large players in the economy who have unparalleled power in the market, unilaterally making a decision.
- cies 5y agoSadly I noticed this too. I see this as a testimony to defunct democracies, that are heavily in the pockets of those making big money off pollution.
- dfxm12 5y agoIt's not democracy, but it is capitalism. You know, the adage, "vote with you wallet". The bigger your wallet, the more say you have.
- adrianN 5y agoAt least it's an improvement over the usual way it works where big players with unparalleled power in the market don't care about the future and unilaterally decide that we should pollute for another decade or two.
- minikites 5y agoGovernment policies would be better than both of these options. The only reason that it "usually" works that way is because of the persistent effort of conservatives to paint government as ineffective at best and harmful at worst, when in reality democratic government is the best way we have to solve problems that require society-level intervention and coordination.
- adrianN 5y agoI'm relatively sure that there is not a single country on the planet with a climate policy that is compatible with the 1.5° goal. Maybe some island nation or so? I think you're oversimplifying if you're just blaming the US flavor of conservatives.
- FpUser 5y agoGreat. Now we are going to count banks as the politicians. Who else is in line?
- gremlinsinc 5y agoWell, we could always dismantle capitalism .. write it off as a failed experiment and try a more collectivism approach like non-statist socialism... aka libertarian socialism. I find it funny though when people who fear socialism and communism so much and who consider themselves libertarians (as in the libertarian party of the USA - not left-libertarian) - start to tear down capitalism and claim they want smaller government, less oversight, less regulation on companies which would allow companies to become even MORE powerful, while at the same time crying foul when these companies push any agenda they don't approve of...as if they should have a say in what capitalists do with their own money/time/etc.
- LatteLazy 5y agoThe issue with one group withdrawing funding is that another group steps in to provide it. And they do so at a better rate for themselves. So the least ethical market participant makes the most profit. I prefer the opposite strategy some funds have taken: investing and then pressuring boards to behave better.
- adrianN 5y agoThe fewer people willing to lend the more expensive money becomes. This can make some projects unprofitable.
- LatteLazy 5y agoThe Problem is that is a long long way off. If you need to borrow 100m USD for a new coal power station, and the total world debt market is about $24tn, you're only borrowing something like 4x10^-5%. So even if 99.999% of lenders decline your project on ecological grounds, you still have 20 times more funding available than you need.
- toast0 5y agoIf there's more profit for the lender who stays, there's an dollar cost for the industry, which should reduce industry activity as projects are started/continued or not based on dollar cost and expected dollar revenues. This might not be the best way to increase dollar costs for the industry, but it is a way to do it.
- LatteLazy 5y agoIf capital costs go up 1%, that's a big boon for capital providers, especially in the days of zero interest rates. If capital costs go up one percent, that's a rounding error for the projects themselves...
- triceratops 5y agoThe fewer people there are that make money off fossil fuels, the less opposition there is to legislating fossil fuels. I think this is the right move.
- cortesoft 5y agoMatt Levine talks about this all the time in his column. These big institutional investors and index fund managers essentially “own the market”, meaning their profit and loss is determined by the entire market’s performance and not particular companies. Some people fear this will decrease competition (because if your biggest investor also is a big investor in your competitor, they might not want you to compete on price as much), but it also leads to big investors sometimes pushing for policies that help society as a whole in places where an investor in a few companies wouldn’t have the same incentive. COVID-19 is an example. An investor in a drug company might want that company to maximize their profit from making a COVID vaccine, but an index fund manager would be willing to sacrifice some profit for a faster vaccine distribution because the benefit to the economy as a whole (and thus their own total profit) would be greater than the lost profit from not maximizing vaccine profits. Climate change is similar. Having index funds and other large fund managers owning the market means their fear of climate change damaging their long term profits is greater than their greed to make profit from one individual company causing environmental damage in pursuit of profit. In some ways it is kinda interesting, since it is a way past the collective action problem that often prevents action on things like climate change. It is also scary, of course, for non-democratic institutions to have so much power.
- Proven 5y agoAnd their point is...? At some point - sooner rather than later - it becomes more profitable to lend to carbon emitters than deal with those busybodies.