10 acteurs responsables transition énergétique

Climate change: a study identifies the 10 actors who could play a decisive role

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Reducing greenhouse gas emissions appears essential today to limit climate change. Excess carbon dioxide in the atmosphere is partly due to deforestation, but mostly due to the burning of fossil fuels. Researchers have looked at ways to bring about a radical change in this field: they reveal in their study which are the 10 financial actors with the most influence on the fossil fuel economy. These actors could play a decisive role in the global decarbonization effort.

Decarbonisation, a pillar of the energy transition, aims to contain global warming below 2°C. It consists in deploying renewable energies (solar, wind, hydraulic, biomass, geothermal energy) as quickly as possible, in order to stop using fossil fuels (oil, gas and coal), CO2 emitters. Building and installing the necessary infrastructure, and encouraging companies to opt for carbon-free energy, is a real challenge — especially since energy efficiency varies from one energy source to another and can impact yields.

Since the Paris Climate Agreement, which entered into force in 2016, the 195 signatory countries have nevertheless committed to a major economic and social transformation, in order to reduce their greenhouse gas emissions. To date, it is clear that the measures have for the most part been too unambitious. A handful of entities could, however, change the situation, according to a recent study. ” Investors have a central role to play in sustainability transitions, due to their outsized influence on the governance of the fossil fuel extraction industry write Truzaar Dordi, principal investigator at the University of Waterloo, and his collaborators.

The future of the world in the hands of 10 investors

A 2020 analysis by Fossil Free Funds found that only 200 companies (united as Carbon Underground 200 or CU200) hold 98% of the world’s oil, gas and coal reserves. Dordi and his colleagues sought to find out who owns these companies, studying the structure of the market and precisely identifying the shareholders with the greatest potential influence on their governance.

Their analysis shows that 10 entities—governments, private investment advisers and sovereign wealth funds around the world—seen to have the biggest influence on the fossil fuel economy, could make changes today that would a transformative impact in the fight against climate change.

To compile this list, the researchers ranked shareholders according to their fossil fuel holdings and their investments in the world’s 200 largest fossil fuel companies. Among the largest shareholders are governments that are signatories to the Paris Agreement and prominent U.S. investment managers, the team says.

This “top 10” is precisely made up of: BlackRock (USA), Vanguard (USA), the Indian government, State Street (USA), the Kingdom of Saudi Arabia, Dimensional Fund Advisors (USA), Life insurance Corporation (India) , Norges Bank (Norway), Fidelity Investments (USA) and Capital Group (USA). These 10 players alone hold 49.5% of the 674 gigatonnes of potential CO2 emissions from the world’s largest energy companies, the study authors point out.

The fact that only a handful of investors have decision-making power over half of the world’s emissions represents “either a problem or an opportunity”, underlines Dordi in a press release. These 49.5% would indeed be enough to tip the world well beyond a warming of +1.5°C…

The only way to avoid a catastrophe

But this figure shows above all that they hold the key to climate change, they are even essential to achieve a sustainable energy transition. ” The decisions of these financial actors, through their holdings in the UC200, have the potential to drive a low-carbon transition write the researchers.

As individuals, we can only act on the consumption of fossil fuels – by limiting our use of cars and planes, for example, in order to reduce demand. But the investors identified in this study have the power to act directly on the production of these fuels. ” Without them, we simply won’t have what it takes to meet our emissions targets and avert disaster. », underlines Dordi.

In their study, the researchers describe the ways in which these 10 actors can really advance the fight against climate change. They refer in particular to “the public disclosure of a planned phase-out of the financing of fossil fuels”. Among the recommendations are also an assessment of a portfolio’s exposure to climate risk in a +2°C world, and alignment of investment portfolios with a +1.5°C scenario.

The researchers are not too optimistic, however: they believe the financial system is unlikely to support the transformative changes needed, “unless it is disciplined to do so”. According to them, these investors should now be held responsible for financing economic activities that contribute to climate instability.

Source: T. Dordi et al., Environmental Innovation and Societal Transitions

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