Lucie Pinson has been researching issues related to energy transition and finance for many years. Before that, she led campaigns focused on fiscal responsibility for social, environmental and climate injustice. She worked with Friends of the Earth and the Sunrise Project. In 2020, she founded the NGO Reclaim Finance, which campaigns to decarbonize the financial sector and serve social and climate justice. She won the prestigious Goldman Prize (dubbed the “Green Novel”) in 2020.
To what extent is finance a “critical lever” in the fight against climate change?
Money is everything. Infrastructure projects such as schools, railways, hospitals, oil platforms and gas power plants require financing and insurance to succeed.
Preventing climate breakdown and transitioning to a sustainable society will require significant investment of more than €406 billion per year in the European Union alone between now and 2030. Transformation will only occur if the necessary investments are successfully attracted and secured. So large-scale finance has responsibilities. This is recognized in the Paris Agreement, which requires the sector to meet climate targets. In practice, this means acting on two levels. That means increasing funding for “green” solutions while reducing funding for polluting companies that will eventually have to go away.
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Another essential factor is the need for sobriety. We can only avoid conflict if we reduce energy consumption at a global level. The financial sector can play a role here, as it requires specific investments. But politicians must act first to ensure that the main efforts are directed at the wealthiest people (basically the biggest emitters) rather than those whose basic rights are already at risk.
For the energy sector, the 2020 target is to invest €10 in the transition, including €6 in sustainable electricity production for every €1 invested in fossil fuels. In addition to amount, there is the issue of quality, and how much is actually funded. €6 should focus on wind and solar power, without forgetting the power grid and storage facilities. Every euro that still has to be spent on fossil fuels should be spent on existing infrastructure, especially technologies that reduce emissions, and never on developing new infrastructure.
This means that funds must be allocated with great care. But this is not just an exercise in logistics. First and foremost, it’s about politics. The solution exists and investors know it. If they are still pouring massive amounts of money into fossil fuel expansion, it is simply because they have decided to prioritize short-term profits over social and environmental considerations.
What (and how much) are we talking about when we mention “?green finance“? Isn’t that an oxymoron?
The growth in climate-friendly commitments from international investors has coincided with a growth in rhetoric about “green finance” or “sustainable finance.” These terms primarily refer to financial products and services that support sustainable initiatives, or at least financial products and services selected based on extra-financial criteria. This contrasts with traditional financial products, which are judged purely on the basis of financial returns.
Clearly, overusing these terms can amount to greenwashing. Moreover, “green finance,” as I have just defined, does nothing to address the root cause of climate change, namely the excessive release of greenhouse gases into the atmosphere through polluting activities that are incompatible with 1.5°C global warming. The term itself may sound like a confession of guilt on the part of the financial sector. The financial sector is well aware that traditional finance is at odds with sustainability goals.
The growth in climate-friendly commitments from international investors has coincided with a growth in rhetoric about “green finance” or “sustainable finance.””
Unfortunately, this term has become the focus of so much hyperbole that it distracts attention from investments that continue to worsen our plight. It is true that official labels are emerging and attempts are being made at national and European level to regulate the content and use of terminology in products labeled “green”. But concretely, little has been done to force investors to stop supporting projects and companies whose business models are incompatible with the goal of limiting global warming to 1.5°C.
This situation suits the interests of financiers, especially those most exposed to hydrocarbons. Green rhetoric not only diverts attention away from the products that do the most harm to the climate, it also means new markets and therefore new opportunities for growth and profit. This time it’s about an ostensibly green product gaining fame.
There are already tools in place, such as the European Green Finance Regulation (SFDR), which imposes standards on banks when defining the financial products they offer to investors. Alas, as shown in VoxEuropAccording to ’s Green Finance report, the SFDR is written with misleading and ambiguous language, making it prone to abuse.
What do you see as the role of the institution? What clear issues are at stake in the run-up to the European elections in June?
The European Commission’s previous term was the Green Deal term. Next comes strengthening and, above all, financing. This issue has been largely ignored until now. Agencies such as the International Energy Agency (IEA) and the European Commission agree that 80-85% of the financing needed for the transition must come from the private sector. Public intervention is essential to force financial entities to make the right asset allocation choices.
There is no shortage of money, but climate solutions will not be funded without proper regulation. And we need to move from regulation that is not just regulation, but regulation that is limited to demands for transparency and reporting, to regulation that puts politics first. This should shape the behavior of financial institutions and the businesses they fund.
Outgoing fees may have mandated financial entities to adopt appropriate plans, particularly through guidance on corporate duty of care. But the directive ultimately excluded the financial sector, thanks to the French Ministry of Economy and France’s EU presidency.
As in many other filings, the French government cynically reneged on its own candidates’ 2019 election promises and opposed the vote by lawmakers. In the EU Council, France opposed financial sector regulation despite a majority of MEPs in favor. EU Parliament. Campaign promises seem to only be binding on those who believe in them.
In June, voters will be best advised to make their choices based on what the various parties have voted for and supported over the past five years. For groups like Reclaim Finance, we will look beyond the election and urge others to continue to mobilize. These elections will mark the beginning of another five years of struggle to put European finances at the service of social and environmental justice.
Who are the most important players? Banks are at the heart of our economy.
Banks play an important role because they hold the purse strings. Even if investors purchase securities and bonds, bank intervention is required to issue them to the market. Despite this, European banks continue to oppose international climate goals as well as those of their own and the EU. Since the last European election, the EU’s top 15 banks have provided more than €170 billion to more than 100 companies at the forefront of the fossil fuel industry. Two-thirds of this comes from France’s four major banks, and while progress has been made in coal, there has been little progress in oil and gas.
Of the 15 French banks that have financed fossil fuel expansion in recent years, how many have pledged to stop that investment in the future in line with the IEA’s scientific recommendations and projections? Just one. And no one has achieved the 2030 target of investing €6 in sustainable energy for every €1 allocated to fossil fuels.
This is despite the fact that banks are now embracing the science. For example, Crédit Agricole’s CEO publicly stated at the group’s last general meeting that oil and gas expansion is incompatible with limiting warming to 1.5°C and that his bank cannot turn a blind eye to the world’s new hydrocarbon projects. I admitted it. A giant in the sector. Nonetheless, banks are still looking for ways to raise funds. Even today, banks directly finance the construction of liquefied natural gas (LNG) terminals. The Banque Populaire Caisse d’Epargne group is probably an even worse group. The group was recently involved in the $4.25 billion deal for TotalEnergies. The funds will be used to develop oil and gas, particularly new LNG fields and terminals. TotalEnergies still allocates two-thirds of its investments here.
What solutions and tools should I have to solve this problem?
A solution exists. All that remains is to make this happen, and this will only be possible by putting the institutions in place. In finance, people often talk about the importance of switching banks and choosing financial products that are good for the planet and human rights. Such actions are indeed important, but they are only truly effective when carried out collectively through political action. Therefore, it remains important to speak out and mobilize collectively to demand that we take back control of our own money and finances in general.
What progress can we point to?
We can welcome the introduction of dual materiality through the European Corporate Sustainability Reporting Directive (CSRD). This dual importance means that financial entities must pay attention not only to the financial risks to which they are exposed (e.g. risks related to climate change), but also to the impact of their investments on climate, human rights and ecosystems.
But so far this remains a simple exercise in transparency. It should be expanded to include an obligation to adopt an appropriate transition roadmap. This should indicate, in particular, how financial companies will align their businesses with European and international climate goals. The plan should also set out how the company will reduce investments in polluting businesses, increase investment in green solutions and support the transformation of sectors that have a future through decarbonization, such as steel and power generation.
