Introduction to Fossil Fuel Investments
In 2016, a Danish pension fund made a significant decision to withdraw its $1 billion investment from oil giants such as ExxonMobil, Shell, and BP. This move was motivated by the fund’s desire to invest in a more climate-friendly way, as the continued investment in fossil energy was deemed not financially useful in the long term. The decision was not just about achieving good investment results, but also about being responsible.
The Fossil Fuel Industry’s Profitability
Despite the growing awareness of climate change, the fossil fuel industry remains highly profitable, with high returns at short notice. According to Nadia Ameli, professor of climate finance at the University of College London, this is reflected in the investment habits of around 60 of the world’s largest banks, which have injected trillions of dollars into the fossil fuel industry since the Paris climate agreement in 2015.
How Oil and Gas Financing Works in 2025
Most new energy capacities now come from solar or wind, which are much cheaper to install than digging for coal or drilling for oil. However, banks that invest in renewable infrastructure still bring in more money from fossil fuels. The International Energy Agency (IEA) has stated that a higher energy requirement for artificial intelligence, data centers, and energy independence is driving investments in renewable energies. However, to achieve the goals agreed upon in global climate talks, the annual investment in renewable power must still double.
Sales: Who Does That and Why
The sale of fossil fuels has increased in recent years, with over 1,600 organizations, including churches, universities, and some large funds, undertaking to withdraw their investments in the industry completely or in part. This is motivated by the desire to avoid the financial risk of stranded assets in the event of a falling use of fossil fuels if the world continues to warm up.
Sales or Commitment: What Actually Cuts Emissions
Part of the money invested in fossil fuels is in bonds, while some is in stocks. Ownership of shares means owning part of the company, which can give investors a seat at the company’s table to influence activities. However, critics of sales say that it is better to have an internal influence to control the course of a company from the inside instead of getting out of investments in fossil fuel companies.
Why Renewable Energies Still Have Difficulty Attracting Capital
Overall, the sector for renewable energies faces difficulties in attracting capital due to its fragmented nature, making it hard to invest large sums. The income generated is often in local currencies, which can lead to volatility affecting profits for investors. Binding regulation, rather than voluntary sales, is required to accelerate changes, say experts.
The Need for Regulation
Experts suggest that a public, transparent assessment of the financial sector of a country and its exposure to the fossil fuel industry is necessary. France has implemented such a system, which increases pressure to transition to renewable energy systems. Similar strict rules apply to investors working throughout the EU, and experts believe that these regulations need to be aimed at the world’s largest banks to achieve a ripple effect. If the biggest investors pull out of fossil fuels, this could trigger a global withdrawal from banks from the sector.
