Fossil fuel finance and corporate inaction: Why are we still failing on SDG 13?

As world leaders convene in New York for the UN's first Climate Ambition Summit, it's clear there's been a surge in climate conciousness within policy, business and public discourse. So why is the crisis still not effectively being addressed?

Fossil fuel finance and corporate inaction: Why are we still failing on SDG 13?

Pictured: Smoke blankets New York during wildfires in Canada, summer 2023

The world is already 1.1C warmer than pre-industrial times. The IPCC recently projected that the 1.5C threshold could be breached as soon as the early 2030s. Moreover, based on national commitments, the temperature rise is likely to exceed 2.6C by the close of the century.

These figures may seem small but they have a dramatic impact on global weather systems.

According to the World Meteorological Organisation (WMO), extreme weather is “the new norm”. The WMO is clear that the primary driver of more frequent and severe extreme weather is human-induced climate change.

In August alone, eight new billion-dollar weather and climate disasters were confirmed in the US by the National Centres for Environmental Information, including Hurricane Idalia, the Hawaii Firestorm, and 21 other severe storms and flooding incidents. These disasters have incurred a cost of more than $57.6bn and led to 253 direct and indirect fatalities.

Additionally, CDP recently shared climate hazard data from 1,090 UK cities that use its platform. The data shows that climate hazards are not just a future concern but an immediate threat for most cities. Over the past year, half of these cities experienced extreme heat, leading to drought in 35% of them and wildfires in 19%.

In a nutshell – the climate crisis continues to worsen despite the ever-increasing number of top-line commitments from nations and corporates. We are not on track to deliver the Paris Agreement nor the targets listed under the UN’s 13th Sustainable Development Goal (SDG), Climate Action. What is preventing change?

Sustainable Development Goals

It bears noting that tackling the climate crisis is not the only facet of sustainable development where global efforts are falling short.

In July this year, the UN disclosed that global advancement of the SDGs has remained “stagnant” for the third consecutive year. Alongside this revelation, the UN issued a stark warning, indicating that if the current pace continues, none of the SDGs will be achieved by 2030.

It was subsequently revealed that there is now a funding gap of up to $137trn relating to SDG delivery. Costs have swelled not only in relation to climate, but in fields such as public health and education.

Although there was notable headway on the SDGs from 2015 to 2019, the Covid-19 pandemic and the conflict in Ukraine have led to a decline in progress, deviating from the anticipated trajectory based on pre-pandemic patterns.

There was an opportunity to achieve a ‘green recovery’ from Covid-19 in the design of economic stimulus packages. The UN’s conclusion is that this opportunity has largely been missed. Most energy and transport funding from stimulus packages globally went to the incumbent fossil fuel systems.

Fossil fuel finance 

Fossil fuels are the predominant source of climate change. Their value chains are responsible for more than 75% of worldwide greenhouse gas emissions and nearly 90% of all carbon dioxide emissions.

UN Global Compact Network UK’s director Steve Kenzie says it is “baffling” that Governments committed to the Paris Agreement continue to so heavily subsidise fossil fuels, and fail to discourage private investment.

The total amount of fossil fuel subsidies provided globally almost doubled year-on-year in 2022, reaching an all-time high of $1trn, according to the International Energy Agency (IEA).

This is the case not only in countries seeking to expand fossil fuels as their economies develop, but in wealthy nations such as the UK.

Since 2015, the UK government has provided £20bn more in support to fossil fuel producers than to renewables, according to research commissioned by the Liberal Democrats. During this period, renewable energy received £60bn in support, while fossil fuel companies were granted nearly £80bn.

Kenzie believes the biggest current barrier to the effective delivery of SDG 13 is political will, in the UK and other nations alike. He says of the UK: “It’s baffling that we are seeing policies in action that conflict with current commitments, such as the expansion of new oil and gas licences, weakening water pollution rules for new builds, and plans to remove various environmental protections through the UK Government’s Retained EU Law Act.

“We know that net-zero is a massive challenge, one that will create a huge shift in our economies and societies and will impact people in the short-term, but the cost of not acting will be much greater.”

Just this week,  reports have emerged that British Prime Minister Rishi Sunak will water down key policies intended to support the decarbonisation of transport and buildings.

He has been strongly cautioned against this by trade bodies, investors and many MPs including more than 100 of his own Conservative colleagues. If he does go ahead with any backtracking, it will be in an attempt to appease those voters and businesses who see climate action as a cost burden.

Pushing through global inertia 

Sunak is not alone in shelving climate ambitions during this economically challenging period.

Before the recent G20 Summit in India, calls were made by companies and green groups for nations to adopt clear targets and consistent policies for rapid private sector decarbonisation aligned with the 1.5°C target, including promoting clean energy and reducing reliance on fossil fuels.

This is a welcome change from the history of corporates pushing to water down environmental legislation in order to make more short-term profits.

Nonetheless, the G20 outcomes were underwhelming. Nations did support the IEA-backed goal of trebling renewable energy capacity globally this decade, but did not support the Agency’s goal on energy efficiency. There was also no strong decision on fossil fuels; oil and gas were not even mentioned in the document.

The Climate Group’s systems change executive director Mike Pierce does not believe this should discourage businesses from making their voice heard in relation to low-carbon policymaking – especially at this critical moment just before COP28.

Drawdown Lab’s founder Jamie Beck Alexander agrees. She adds: “There’s strength in numbers and when CEOs or other executives within businesses come together across sectors to say we all want bold climate action from our political leaders. That’s really powerful.

She also notes that it shouldn’t all be down to the CEOs, stating: “To me, the most important form of partnership a business can have is with its workforce. Employees should have decision-making power to lead climate action from within.”

Pierce recounts a previous example of success in this field, saying: “In South Korea, initiatives like the RE100 and related aspects became prominent in public conversations, even during the presidential election, because they were recognised as a crucial economic opportunity for the country.

“This shift was partly driven by both international businesses and leading South Korean companies advocating for greater clarity on renewable energy. They acknowledged that external companies want to source from South Korea but require renewable energy, which is currently not readily available.”

The RE100 is an initiative convening more than 400 companies with a commitment to transition to 100% renewable electricity. These businesses have revenues exceeding $6.6trn and account for almost 2% of global electricity consumption, so their potential for market influence is not to be understated.

Pierce believes that a businesses’ engagement in climate-related policymaking is most impactful once it has identified strategic opportunities and raised awareness among senior leadership.

Businesses will also have built the capacity and business rationale for action, aiming to secure revenue, improve efficiency, or enhance their reputation.

Finance levers 

While many businesses now participate in policy engagement for progressive climate action through trade bodies, Drawdown Lab’s Alexander believes many are not yet acting with their dollar.

Drawdown Lab is a not-for-profit that exists to quantify the potential emissions impact of a plethora of climate solutions that are already available. Its team also assesses solutions in terms of affordability and likely positive impacts across the broader sustainable development agenda. This data is used to foster more informed converations and more urgent action from businesses and governments.

Delivering the solutions listed in Drawdown’s top 100 at the scale and pace needed is possible, Alexander explains, using money that could be reaped by scaling back support for fossil fuels. Solutions include stopping methane leaks; improving energy efficiency; investing in effective and clean refrigeration, heating, cooling and cooking; restoring nature and keeping girls and young women in education.

Alexander believes that the crux of historic and continued inertia has been the sheer financial power and political influence propping up fossil fuels. This has become ingrained in the mindsets of political and business leaders who can struggle to envision an alternative way forward, even as they are told by climate experts that “rapid, far-reaching” change is needed.

Over the past seven years, global banks have collectively channelled more than $5.5trn into the fossil fuel sector.

Alexander says: “Every company has the capacity to exert pressure on its banks. Companies typically hold substantial funds in various forms, including bonds, stocks, corporate cash reserves, as well as employee assets like 401Ks, insurance, and pension funds.

“The biggest financiers of fossil fuels are the big banks. So, how can companies that have a lot of influence over their banks pressure those banks to stop financing fossil fuels?”

UN Global Compact Network UK, the Climate Group, and Project Drawdown all tell edie that, given the current climate emergency, anything less than a global accord to swiftly eliminate fossil fuels at COP28 in Dubai this upcoming winter would fall short of addressing the urgency of the situation.

Alexander also noted that, while the energy transition is the lynchpin in achieving SDG13, the transition of land-use systems is not to be underestimated – and should not be managed by those who have historically exploited the land. She highlighted the importance of ensuring that Indigenous leaders are heard at COP28. The exclusion of these experts in biodiversity management has long been a sticking point with the COP process and, indeed, other global climate diplomacy events and agreements.

This brings us back to the SDGs. The failure to get on track to deliver SDG 13, as well as many of the other Goals, is doubtless indicative of a cohort of world leaders and business leaders not yet taking a holistic approach to sustainability – despite their warm words.

Sidhi Mittal and Sarah George

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