Finance Finance News Financial pressure on fossil fuels builds with Goldman Sachs’ coal ban

Financial pressure on fossil fuels builds with Goldman Sachs’ coal ban

Fossil fuels.
Investors are taking money out of fossil fuel mining.
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Global investment giant Goldman Sachs’ decision to abandon the coal industry means a revolt by investors against climate risk “is starting to gain momentum,” according to ANU public policy professor and former Liberal opposition leader Dr John Hewson.

Goldman pledged on Friday that it would no longer fund new coal mines or coal-fired power stations. The move came days after the Bank of England raised the prospects of forcing UK banks and insurers to stress test their businesses against a possible C4 degree temperature rise.

The wave of investor climate fear will increasingly affect Australia.

“The Australian banks still have very large exposures to fossil fuels through loans to mines, equity in projects and loans to associated transport and loading infrastructure,” Dr Hewson said.

Dr Hewson warned that banks would increasingly reduce their coal exposures. Photo: AAP

“When they look at those numbers they’re going to increasingly see the risks to themselves and their clients and we will start to see more and more of this [reductions in exposure]” Dr Hewson said.

Dr Hewson’s comments came the same week as financial consultants PWC released a report recommending Australia move to 80 per cent renewable power by 2040. The move “would also add more than $13 billion to GDP and enable an additional $6 billion in consumption by Australians”, PWC found.

Pushing the envelope to 90 per cent would add $15 billion to GDP and allow “increased spending by Australians of $11 billion”.

The falling cost of renewable energy would make coal investments increasingly difficult. “There’s a progressive effect; as the cost of renewables continue to fall no-one will bother to invest in coal fired power,” Dr Hewson said.

“So it follows that no-one will want to invest in new coal mines, especially when it’s a 25 year investment and we know that 70 per cent of all coal that’s in the ground can’t be mined [if we want to meet global warming targets]”.

Globally the emergence of electric vehicles will speed the move away from fossil fuel investments as big investors and banks worry about exposure to assets that become stranded and valueless as demand for coal and oil drops.

“You will see more and more financial institutions managing down their exposure to fossil fuels over time,” Dr Hewson said.

As a case in point Dr Hewson observed that Norway’s $US1.1 trillion [$A1.6 trillion] sovereign wealth fund will divest from companies wholly focused on the oil and gas industry while some charitable funds owned by the Rockefeller family will also walk away from big oil.

“That’s despite the fact that both Norway and the Rockefellers built that wealth on oil,” Dr Hewson said.

The move away from fossil fuel power generation is under way, PWC found.”In 2018, the world invested approximately US$300 billion [$A435 billion] in renewable power generation, more than 2.4 times the amount spent on fossil-fuelled generation.”

The chart “shows that the vast majority of additions to power generation will be from non-fossil fuel sources over the next two decades. It also shows that the highest proportion of retirements will be from coal and gas assets,” PWC observed. It also “highlights the lessening relevance of coal-fired generation globally with coal plant additions just exceeding retirements on average.”

In other expressions of concern about climate risk, Telstra threatened to rescind its membership of the Business Council of Australia over climate change policy inconsistency.

“Our review of the Business Council of Australia concluded that formal climate and energy policy positions held by the BCA differ to commentary presented by them in public discourse,” Telstra said in a statement.”

Earlier this month former banking royal commissioner Kenneth Hayne warned company directors that they had a legal duty to act on climate change risk.

Dr Hewson is chair of Bioenergy Australia. Another company he chaired, SolarReserve, scrapped a plan to build a $650 million solar thermal power station at Port Augusta in April after it failed to gain commercial finance.


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