More businesses are putting capital to work on protecting the climate
Can Money Save the World?
by Doron Amiran, The Climate Center
There is an old saying that money makes the world go round. The truth, of course, is that money is neutral and can be a force for good or a force for bad. In seeking to address the climate crisis, we must take a hard look at the policies we use to direct the power of finance.
Change is badly needed. Between 2016 and 2019, the four largest banks in the United States– JP Morgan Chase, Wells Fargo, Citi, and Bank of America– poured $1.9 trillion into fossil fuel investments. These banks enjoy private profits at public cost. The public pays for the damage caused by climate-change-fueled hurricanes, wildfires, and floods, as well as the damage to public health of pollution from fossil fuel use.
In counterpoint, mission-driven banks like Beneficial Bank, a member of The Climate Center’s Business for Clean Energy (BCE) network, have made “do no harm” a core part of their business. In other words, their corporate charter requires them to consider social and environmental factors alongside simple return on investment.
This innovation is spilling over into larger financial institutions. For example, Black Rock Financial, the world’s largest money manager, announced at the beginning of this year, that they will make climate risks a key tenet of their investment strategy. Recognizing that a collapsing climate presents a grave threat to all their investors, Black Rock declared that their $7+ trillion in assets would no longer support projects like coal-fired power plants.
Here in Sonoma County, using the power of money for good is second nature to many companies. Jerry Guffy of Mission Capital, another member of The Climate Center’s Business of Clean Energy network, is enthusiastic about the opportunity presented by financing green projects and renewable energy. He says that “a very large percentage of our current financing is for renewable energy projects, with solar a major focus... Typically a customer’s payments are much less than the savings on utilities, resulting in immediate net positive cash flow.”
More financial institutions need to follow the lead of Beneficial Bank and Mission Capital. This is why many organizations are pressuring large banks to stop financing fossil fuel projects, and they are seeing progress. The European Investment Bank (EIB), the world’s largest public bank and the €555bn lending arm of the EU, recently declared that they will cease financing most fossil fuel projects as they become the world’s first ‘climate bank’. If other large banks across the world were to follow suit, it would be transformative.
The building sector has seen a lot of innovation in green finance in the last two decades and may have lessons that can be applied to other sectors. These policies include on-bill financing or “Pay-As-You-Save,” whereby energy upgrade projects are financed by amortizing capital costs and paying them down using the savings on the energy bills. Homeowners can unlock capital using Property-Assessed Clean Energy (PACE) from companies like Petaluma’s Ygrene, and get loans to install energy efficiency upgrades and rooftop solar, and pay it down on their property tax. Or they can utilize Energy Efficiency Mortgages and fold payments for energy efficiency and rooftop solar into their mortgage.
The rise of green finance has helped global renewable energy quadruple over the last decade. It has been nowhere near enough to reverse the climate crisis. We need to achieve carbon neutrality by 2030 and net-negative carbon by 2035. Such rapid decarbonization means we must achieve 100% GHG-free energy by 2030, while aggressively pulling carbon dioxide out of the atmosphere. This will require much more robust financing tools to jump-start the transition.
That is why The Climate Center is supporting HR 763, the Energy Innovation and Carbon Dividend Act, which proposes placing a price on carbon at the point of extraction to encourage market-driven innovation of clean energy technologies. The bill would distribute these revenues to every person with a social security number via a “dividend” to offset the costs.
The Climate Center is also calling for a frequent flyer fee in California to create a new climate fund. With roughly 105 million passengers at the top California airports in 2016, we could quickly raise over $1 billion for a $10 fee on top of a one-way plane ticket. In addition, The Climate Center also supports green bonds similar to what the Los Angeles County Metropolitan Transportation Authority has used to raise $420 million in 2019. Green bonds are so promising that the Goldman School of Public Policy at UC Berkeley is partnering with the California State Treasurer to establish a California Green Bond Market Development Committee to expand financing for climate-friendly infrastructure.
With 9 of 15 global tipping points for climate change now active, what we do today can either unleash an inhospitable hothouse Earth or secure a safe climate well into the future. Our best hope for a vibrant, healthy, and equitable future for all is to enact bold climate policies now, including new financing mechanisms to catalyze our transition to a climate-safe world.