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World Bank chief backs fossil fuel divestment drive

Jim Yong Kim says levels of carbon dioxide threaten development gains over the past two decades

(Pic: UN Photo/Rick Bajornas)

(Pic: UN Photo/Rick Bajornas)

By Ed King

The head of one of the world’s most powerful financial institutions says governments and business should consider withdrawing funding from oil, gas and coal companies.

“Through policy reforms, we can divest and tax that which we don’t want, the carbon that threatens development gains over the last 20 years,” World Bank President Jim Yong Kim said in an address at the World Economic Forum summit in Davos, Switzerland.

Jim added financial regulators should set this agenda by forcing companies to reveal their exposure to climate-related impacts. He said: “The so-called “long-term investors” must recognize their fiduciary responsibility to future pension holders who will be affected by decisions made today. Corporate leaders should not wait to act until market signals are right and national investment policies are in place.”

World Bank Group vice president and special envoy for climate change Rachel Kyte described his call as “prudent”. It is believed to be the first time he has publically backed moves to cut investments in industries responsible for releasing large quantities of climate warming gases into the atmosphere.

The remarks are significant and a sign the institution is “ratcheting up its position”, according to Craig Mackenzie, Head of Sustainability at Lloyds Banking Group.

He told RTCC: “The World Bank is one of the top five financial institutions, so for its leader to call for divestment and challenge the pension funds to think more widely about fiduciary duty and come up with another $30 billion of green bonds in the next 12 months…I’m not aware of that happening before from the head of the World Bank.”

 

Under Jim’s tenure as President, the bank has steadily reduced its level of support for fossil fuel power stations in developing countries, announcing last year it would not back any new coal-fired energy plants “except in rare circumstances.”

Momentum and research into divestment from the fossil fuel sector has gathered pace in the past year. Greenpeace has warned of 14 ‘carbon bombs’ that could tip global warming off the scale if planned drilling and mining goes ahead.

HSBC says coal assets in Australia could see their value halved in the next 24 months, while the Carbon Tracker Initiative says $674 billion annual investments in oil, coal and gas are at risk because they cannot be used if governments agree an emissions reduction deal at a UN summit scheduled for December 2015.

James Leaton, head of research at Carbon Tracker, told RTCC Jim’s remarks demonstrate the need for investors and regulators to work harder at identifying the implications of tackling climate change, and review their long-term capital expenditure.

“Divestment can occur at several levels – investors avoiding high cost, high carbon activities (eg coal or tarsands), or fund managers adjusting the weightings in their portfolios, or companies cancelling capital expenditure or selling off assets,” he said. “All of these are responses that reflect the direction of travel needed to deliver a low carbon energy system.”

Jim’s statement is the latest in a series of warnings from senior intergovernmental and UN figures about the need to focus on climate change. Last week UN Secretary General Ban Ki-moon called on governments to deliver their plans to reduce climate-warming gases to him by September, ahead of a world leaders’ climate summit he has planned in New York.

Two weeks ago UN climate chief Christiana Figueres told a meeting of leading investors they could be breaking the law if they fail to embed climate risk analysis in their long term planning.

“Investment decisions need to reflect the clear scientific evidence, and fiduciary responsibility needs to grasp the intergenerational reality: namely that unchecked climate change has the potential to impact and eventually devastate the lives, livelihoods and savings of many, now and well into the future,” she said.

Related News

World Bank spent $1bn exploring for new fossil fuels in 2013 4 months ago

Are the economics and ethics of fossil fuel divestment aligning? 7 months ago

Divestment stigma threatens fossil fuel’s future – report 10 months ago

World Bank chief defends coal investments 1 year ago

  • Steve Leary from LAON

    I’m from the UK. I wonder how an agency of the UK Government is feeling now after it bailed out UK Coal plc after that company went bankrupt last year. It hived off the remaining deep mines (2) and the working surface mines, but via its stake in Coalfield Resources kept an interest in a 30,000 hectare landbank. A proportion of this is proper brownfield land, left derelict from the days of deep mining. However a large part of it is suspected of being farming land overlying shallow coal deposits potentially ripe for ‘development’.

    Was the UK Pensions Protection Agency sold a dummy?

  • FatBastage72

    So the Korean in charge of the United Numpties thinks he can pressure legitimate governments into doing their hot-air homework early and then the Korean in charge of the world bank thinks he can pressure real investors into ostracising cheap, reliable energy development.
    I’m not normally into conspiracy theories, but is this Korea’s way of ensuring that what’s left of western industry is finally killed off due to spirally energy cost (and can never again compete with Korean industry) and also ensuring that the third world remains firmly in energy poverty (and can never aspire to compete with Korean industry)?
    One other point; Christiana Figurehead only suggests that investors could be
    failing their duty of care to shareholders, it’s some leap to imply that constitutes ‘breaking the law’.
    Out of interest, whose ‘law’ does a United Numpties bureaucrat even refer to if they make veiled threats like this? Are we referring to the law of the most generous donor to the UN? Will Obama sic the Marines on you if you lend the money to Namibia to build a new coal fired power station that works instead of lending money to Kenya to build a photovoltaic monument that doesn’t?
    Since we’re obviously in la-la land, maybe it’s the law of the Galactic Imperial Empire that holds sway and Darth Vader will find our lack of faith disturbing for failing to give a toss everytime one of these unelected puppets makes another toothless threat?
    The cause just gets more and more crazy as more and more of the voting population understand that gullible warming and the parasitic instutions that live off it were always a scam.

    • Dani G.

      You are obviously so ill informed on the science of climate change and haven’t opened your eyes enough to see the havoc and expense it is causing in tsunamis, droughts, water shortages, sea surges, super storms, etc. You are obviously oblivious to the cost of these superstorms, 65 billion for Sandy, $75 billion for Katrina, tornedoes devasting whole towns, Fema running out of money. Coal is filthy fossil fuels and we are dumping 70 millions tons of brain damaging polluting into our atmosphere ever day. 40 % of USA children now have asthma and many die of lung disease for filthy fossil fuels that are killing our habitable Earth. It is foolish not to see the wisdome in halting the development of filthy fossil fuels READ THE SCIENCE WORLDWIDE. You are destructive of life and and economy with your foolish, unschooled, xenophobic and ignorant attitude and beliefs. Your mentality, like the nefarious Koch Bros., Exxon Mobil, Shell, BP and Conoco Philips etc. is destroying all life on Earth. Wake up, scientists WORLDWIDE tell us there is only about a decade if that to save habitable Earth.

    • Jims

      I have flagged your comment as inappropriate. Hopefully they will take action soon and take down this type of garbage. It is unfortunate that we still have people like you stuck in “la-la land”. Face the facts, please and don’t waste your time commenting. Seriously.