This is the first article of Fossil Money, a series that we’ll publish over the next weeks. Stay tuned!
Money, money, money. Capital, bread, dinero, cheddar. Money is a sneaky thing, moving through a maze of mirrors all over the globe and adopting many forms. In this system humans have created and live in, it’s money that moves the world. It’s the ballot of the companies and reflects their real intentions much beyond what they may say in the media, social or otherwise. It’s the lifeblood of their decisions and the fuel of the fuel.
At the centre of the tangled mess of global, modern money sits the financial system. Banks, insurers, funds and nations allocate their money to different ventures, effectively shaping a very important part of our world. They act as the gatekeepers of money, and, as such, wield a huge power to decide what gets done and what doesn’t. If companies drill and burn fossil fuels, or if a just transition gets underway, it depends, in (a large) part on the financial system. So for a just transition to community-led and renewable energy to get underway, we have to bring the financial system to defund fossil fuels. A just transition that includes everyone, that ends the colonial system, that promotes accountability and pays reparations is just not compatible with the financial system investing in fossil fuels.
That’s why, for many years already, 350.org has advocated for these decision-makers to divest from fossil fuels. Cut the fossil industry’s access to money and their ability to wreck our climate dries up. Cut the cash flow to fossil fuels and justice flourishes. And not only can this be done. It has been done and continues to be done, with people power.
There are many ways to push for justice. Many of them will take you, at one point or another, down into the labyrinth of fossil money. That’s why we’ve prepared this series: a map to guide you through the maze. So bring in your allies and good luck!
Climate Finance and Fossil Finance
When you first start reading about money and finance, you may encounter that even the most basic terms can get confusingly similar. Sometimes, some writers may use some of them interchangeably. And some other times, the fossil industry’s PR machine may use this to confuse you.
Maybe the most confusing of all money terms, climate finance refers to all the capital-related operations that flow into the struggle against climate change. These resources can flow into mitigation, adaptation, loss & damage, climate justice movements… just anything that helps us move on from the fossil era.
Climate finance is what private or public actors do when they understand that we’re in a climate emergency and solutions need resources to become a reality.
Opposite to climate finance, fossil finance refers to all the money fluxes that end up in climate-wrecking activities. These may be drilling operations, coal plant constructions and mines, pipelines, airport expansions… but it’s also any money donated to climate-denying candidates and side operations such as roads or PR campaigns in favour of climate-wrecking companies.
Money, like oil and gas, is almost never used in the same place where it is generated. It needs to move, get transported and distributed. To do this, a whole global system exists. The money that is invested in fossil fuel operations in a place comes through banks, investment funds or other financial institutions, and before that, from public and private investors. More often than not, these investors come from the Global North to invest in the Global South (and go back home with the spoils).
Climb up the pipeline and you’ll find points to apply pressure and choke the money out of climate destroyers!
These are the gatekeepers of money. Those who decide where it goes and where it doesn’t. We’re mostly talking about retail banks (including traditional and digital ones), investment banks and funds, central banks, credit unions, insurance companies and brokers. When a new fossil fuel development receives an investment, you can bet that it has come through financial institutions.
Development Banks (and cooperatives)
Of all financial institutions, development banks are some of the most interesting from the point of view of the climate movement. Why? Because more often than not they’re public! States, regions or groups of states or regions, control them either directly or through hefty donations. They often offer technical assistance in addition to financial services.
Development banks invest their money in long term projects that are supposed to help underdeveloped areas to catch up with the more developed ones, but this is not always the case. As illustrated by fossil fuel “developments”, which in reality make these areas more vulnerable.
At this point, one thing should be clear: money moves. And as it does, it transforms (into projects, developments, actions…). When we talk about investment, we talk about money being allocated (moved) into a project. And we don’t want this to be a fossil project!
The opposite would be “divestment”. This is when the money gatekeeper decides to retire, or stop allocating, their money from a fossil project. They can then reinvest it somewhere else!
An asset is something that “produces” capital. For example, a shop is an asset. You can buy a shop with the hope that it will produce an income for you and your family over time.
Pipelines, coal mines, airports and oil fields are assets too. Companies purchase them in hope that they will produce an income for the companies that own them over time. But nothing lasts forever!
Once an asset can’t produce an income anymore, it becomes “stranded”, in the sense that nobody would buy it (as it doesn’t produce an income!). Many studies indicate that, as more and more people realise that we have to stop burning fossil fuels (and stand up for it!), fossil assets are on their way out. They’re becoming stranded. And we sure are looking forward to that day!
Spending money on planet-wrecking activities for profit is not exactly popular. Polluting industries and those that invest in them know that people power will topple their business model. That’s why they often try to confuse the public with different tactics of disinformation and misinformation. Greenwashing is one of them.
We talk about Greenwashing when polluters or their funders disproportionately highlight one project, action or decision that is not destroying climate in order to strengthen their social licence. They will try to trick people, media and organisations into focusing on those cases instead of the elephant in the room: the fact that fossil fuels are incompatible with any livable future.