UK government development bank to end fossil fuel financing.
CDC Group’s climate strategy will stop support for most polluting projects in developing countries.
The UK government’s overseas development bank has bowed to calls to end fossil fuel financing abroad by promising to invest only in companies that align with the Paris climate agreement.
The CDC Group revealed its new climate strategy, which will end support for the most polluting fossil fuel projects, including the production of oil and coal, and channel almost a third of its spending towards climate finance.
The publicly owned investor, which supports job-creating sectors in Africa and south Asia, will end financing for coal mining, and oil and gas production, as well as new or existing power plants and refineries that use coal or heavy oil.
The UK government is under growing pressure to end its support for overseas fossil fuel projects after campaigners revealed that more than £3bn in public money was used to support polluting projects abroad since the Paris climate agreement was signed.
Environmental campaigners have accused ministers of “rank hypocrisy” for claiming a global lead in decarbonising the British economy while continuing to fund fossil fuel projects overseas.
The Guardian has revealed that senior civil servants are in talks over a government-wide policy to curb foreign fossil fuel support before the UK hosts the UN climate talks next year.
The decision to curb support follows an exodus of major institutional investors from the coal industry in recent years, including Goldman Sachs and Blackrock.
Investors are wary of supporting industries that contribute to the climate crisis, and may risk the financial stability of their funds. Norway’s $1.19tn (£950bn) sovereign wealth fund, the largest in the world, has decided to reduce its exposure to oil and gas investments too, to guard against the risk of a quicker than expected global shift away from fossil fuels towards cleaner alternatives.
The CDC’s new climate strategy will place “a climate lens” over every sector in which it invests to make sure companies are reducing emissions, according to the development bank.
Nick O’Donohoe, the CDC’s chief executive, said: “Climate change remains the single largest challenge faced by the planet and is the defining issue for our generation and for those that will follow. That is why we have launched this ground-breaking climate change strategy that will shape every single investment decision we make moving forward.”
The bank will allow only rare investments in gas power plants to support the UN’s sustainable development goals, and only in countries that can prove the project is aligned with a wider climate transition plan.
This exception is likely to anger climate campaign groups, which would prefer a complete end to all fossil fuel support in favour of renewable energy investments.
Others argue that the social and economic benefits of modest fossil fuel investments in areas with very limited energy access would outweigh the incremental increase in emissions they would produce.
A recent report on energy in Africa by the International Energy Agency (IEA) warned that some new investment in gas-fired power generation would be needed alongside a surge in renewable energy - but the impact on global climate emissions would be negligible.
Amal-Lee Amin, the CDC’s director of climate change, said: “Countries in Africa and south Asia are tackling the climate emergency alongside other urgent needs, most notably the need for economic growth, increased energy access and improved living standards to meet the needs of their citizens and to meet the UN sustainable development goals (SDGs).”
“We will also invest in new opportunities and shape the markets that are needed to ensure the low carbon transition is socially just and that development pathways are resilient to existing and future climate risks and impacts.”
2 July 2020