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Not just industry: Banks can also save the planet

The largest bank in the United States has announced that it has joined the fight against the climate crisis, through the management of an investment flow that encourages measures and actions to reduce greenhouse gas emissions.

Will we soon see financial institutions in Israel also moving in this direction?

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• Banks

Lior Sack, Angle

Thursday, 10 September 2020, 00:22

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Bank of America, the largest bank in North America and one of the largest banks in the world, announced this month that it has joined the international organization PCAF - The Partnership for carbon accounting financials.

The partners in the PCAF organization undertake to apply innovative tools and methods for estimating the level of greenhouse gas emissions caused by their business activities.

The PCAF organization provides transparency regarding the implications of the financial activities of banks, organizations and investors from around the world on the level of greenhouse gas emissions (GHGs) and their impact on global climate change.

The main purpose of the PCAF is to raise awareness and the need for action among all shareholders and stakeholders in member organizations, regarding the resolution of the climate crisis and the critical role of the business and financial sector in actions and steps to create a low-carbon company.

The Bank of America's accession to PCAF could be an important and groundbreaking step as a first practical step on the way to significantly reducing its investments in the fossil fuel industries (coal, oil or natural gas), the production and use of which are the main source of greenhouse gas emissions. Methane, dioxin dioxide) to the atmosphere and consequently to an increase in the temperature of the atmosphere and the sea on Earth and an increase in the frequency of occurrence of extreme events such as: storms, floods, droughts and huge fires.

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Such a move means for the bank itself and the financial system in general, a new business preparation and organization, which is based on a commitment to the future of human society in the face of the climate crisis, which entails economic, environmental and health risks.

The principles on which the organization is based were set out in 2015, at the UN Paris Conference Agreements, in which representatives of the vast majority of world countries announced that only global warming should be reduced to between 2-1.5 degrees Celsius (above pre-industrial levels) by 20 The

realization of the Paris Agreements necessitates a fundamental change in the utilization of the world's energy sources, with an emphasis on a significant reduction in the use of polluting fossil fuels within 10-20 years. Nevertheless, to this day the large banks representing most global firms and assets have continued Invest a huge amount in the oil, coal and gas sector equivalent to $ 2.4 billion every working day since the end of 2015.

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Total value of $ 11.7 trillion

"Initiatives such as the PCAF, which has been joined by dozens of banks and financial entities, are driven by the recognition that preparing for the climate crisis is a clear economic matter. The climate crisis brings with it natural disasters and extreme phenomena that will cause enormous damage.

PCAF partner members and experts work to assess the risks posed by the climate crisis, including setting goals and objectives that are in line with the Paris Agreement.

The organization's activities are focused on developing strategies to reduce greenhouse gas emissions as a result of investments in polluting energy, while creating commitment and organizational action to combat climate change.

The organization believes that the solution to the climate crisis lies in changing international political-economic perception, which will lead to a policy of using renewable alternative energy sources (such as wind energy or solar energy) as an alternative to polluting fossil fuels. Economic viability.

The PCAF has over 70 banks, insurance companies and asset holders from five continents (USA, Latin America, Europe, Africa and Asia). By joining the organization, Bank of America becomes the highest-performing financial institution in the organization, immediately after it, The American Citibank is located (with an asset value of almost $ 2 trillion), which also joined the organization this month, and the total asset value of all the companies currently stands at about US $ 11.7 trillion.

Adv

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Orly Aharoni, a consultant for sustainability and financial regulation, explains that Initiatives such as the PCAF, which has been joined by dozens of banks and financial institutions, are driven by the recognition that preparing for the climate crisis is a clear economic matter. The climate crisis brings with it natural disasters and extreme phenomena that will cause enormous damage.

For an industry without emissions.

"Such a move must be graded and planned.

" "Financial entities such as the Bank of America fully understand that the lack of preparation today will lead to a heavy economic price in the future," Aharoni adds.

A global standard for carbon emissions

The mobilization of the business sector to combat the climate crisis sets a global standard for monitoring and controlling the level of carbon dioxide emissions.

The PCAF allows free access to knowledge bases that contain science-based methods for managing and estimating the environmental damage created as a result of investments in polluting industry, along with providing recommendations for directing investments to sustainable energy.

In 2018, the Dutch bank AMRO ABN published, in accordance with the outline of the PCAF, the level of greenhouse gas emissions caused by the granting of business loans by the bank to a variety of sectors in the economy (agriculture, minerals, industry, transportation and more).

These data showed that the agricultural sector is responsible for a very high level of emissions in the Netherlands (8 million tonnes per year).

That same year, the Dutch bank Triodos revealed in an annual report that with the help of PCAF's methodology and investment in renewable energy projects, they were able to prevent emissions of almost one million tonnes of carbon a year - equivalent to pollution caused by an average of 210,000 private cars a year. .

Banks, municipalities and universities

In parallel with PCAF's activities, other initiatives are emerging that aim to bring about significant global change in the financial sector's attitude to the climate crisis.

The global Fossil Free movement, for example, which works to divert investment from the fossil fuel industry and beyond to renewable energies, says that the trend of diverting investment from the fossil fuel industry is gaining momentum among the world's leading economies.

In addition to banks, to date over 1,240 organizations have diverted investments totaling $ 14.6 trillion.

Among them are government bodies and large municipalities (such as New York, San Francisco, Washington and others), academic bodies and universities (including Oxford University, Cornell, Stanford and others) philanthropic funds and pension funds that have stated that they work to divert investment in favor of renewable energy.

And what is happening to us?

Israel, too, has the first buds to divert investment.

Fossil Free Israel works together with a broad coalition of environmental organizations in favor of diverting citizens' investment money to renewable energy and creating investment channels in Israel that do not include fossil fuels.

In 2018, a green trend began a struggle to divert investment among universities in Israel.

Last April, Greenpeace Israel also appealed to Dr. Moshe Barkat, the Capital Market Commissioner, to stop investing public funds in polluting fuels.

"The money and savings of each of us are invested in banks, pension funds and provident funds, and most of it is invested in destructive industry for our future and future Our children.

Financial pressure must be exerted on the government in favor of shifting public funds in favor of using renewable energy.

"Public pressure is leading large investors to divert investment from a polluting industry to a green industry," said Dr. Ram Fishman, of the Department of Public Policy at Tel Aviv University, at a meeting held this month by Fossil Free Israel.

"Creating an organizational commitment to the fight against global warming is a significant milestone in the socio-economic response to climate change."

"There is no reason to continue investing in companies that produce fuels that cook the earth," says Yossi Kadan, the center of the International Investment Diversion Campaign at Organization 350, whose main mission is to motivate the public to act and demand from banks, pension funds and investment houses to invest in renewable energy.

"In the future, these companies will become unusable on the stock market and the value of the money invested in them will be nil, which could lead to an acute economic crisis. The technological tools already exist, only political recognition remains to be diverted to investments from polluting industry projects," says Kadan.

"Until today, the person who led the investment diversion campaigns was the public who live near sources of pollution and who suffer from air pollution," adds Kadan.

"Clean investments for a better future are also for the pocket and not just for health. The money set aside from us each month can do a lot of good. Today, there are more than 1,200 organizations and institutions that diverted investment, but the economic damage to the polluting fuel industry remains negligible."

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Just getting green?

The CEO of Bank of America has been asked in the past whether his statements about investing in green projects have a real basis, or whether they serve only public relations and constitute a kind of greenwash (greening, in Hebrew). "$ 300 billion sounds like greenwash to you?" He replied. "It's not a small and symbolic step for us, it's a real business power.

" "I really was not afraid that this was a green wash," says Aharoni, "There is no commitment here not to invest in fossil fuels at all - the great significance of the PCAF initiative and Large banks to it, is under the transparent management of the 'brown industry' - the emissions industry.

Estimating the level of carbon emissions allows an assessment of any investment or loan given to industry, in parameters of the extent of emissions.

In this way, it is possible to transparently and openly know exactly what is being financed, and to manage the investment flow, taking into account the extent of the impact on reducing climate risks.

This is a significant step in practical assessments for crisis prevention and the implementation of the Paris Agreement.

"" In Israel, there is an increase in awareness of investment diversion, but not in the scope and pace required.

Civic involvement, and activities of environmental organizations may not suffice.

It is important to prepare, and the preparation must be comprehensive - governmental, regulatory and business, "Aharoni adds.

An annual report published by the Bank of Israel last June on" The global fight against global warming and its implications for Israel "states that" economically, tackling global warming involves increasing "Investments in infrastructure of energy sources that emit less (or do not emit at all) greenhouse gases. Since these changes have not occurred so far through market mechanisms, and there is no reason to think they will occur on their own in the future, government intervention is needed."

The report goes on to say that “ensuring financial stability involves addressing the risks of global warming appropriately, as these are large and significant risks.

The systemic financial risks associated with global warming include risks to investment credit, assets exposed to the damage of global warming and the insurers of such assets.

Business risks are posed to companies whose production processes involve a high volume of greenhouse gas emissions, as they are exposed to policy measures that will be taken as part of the effort to reduce emissions. "" The Israeli economy's investments in gas infrastructure and electricity production and regulations have significant impact on decades. And these regulations. "

" The practice of estimating and discovering the extent of carbon emissions in any industry is an excellent step in managing investments with respect to climate risks in order to reduce emissions, "Aharoni concludes." So is shifting investments from fossil fuels to green tracks.

I believe that recognition of the growing world financial institutions need to make a change in perception and significantly reduce carbon emissions will trickle down to us, too. "

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