What the world needed, at the end of the hottest year on record, was a bold commitment to phase out fossil fuels, and that did not happen. The agreements that have been made, are insufficient for a timely, just and fair transition away from fossil fuels towards sustainable energy based systems.
Yet this is the first time that the words fossil fuels have been mentioned at all in a final statement of a UN climate summit. This makes the risk of so-called “stranded assets” for financial institutions, clearly visible. Any sensible financial institution will now stop financing fossil fuels even faster. This will lead to an acceleration of the shift of capital from fossil fuels to renewable energy.
This is crucial because climate isn't about more money, but about money going to the right places. This means that financial institutions have a choice to be part of the solution by taking their own responsibility. By ending the financing of fossil fuels and increasing financing of renewable energy, the sector can boost the transition to a sustainable economy.
Not only do financial institutions have to reallocate money. Advocating for a Fossil Fuel Non-Proliferation Treaty is now paramount. Financial institutions should urge governments to collaborate on creating this legal agreement to truly end the use of oil, coal, and natural gas in a timely and just manner. A fossil fuel treaty is the most logical step to make net-zero ambitions of governments and business a reality.
To foster a better outcome at next year’s COP29, the sector should also actively engage with governments and encourage them to agree on strict requirements to achieve the Paris climate accord and to implement robust policies.