‘Reading the writing on the wall’: why Wall Street is acting on the climate crisis
The industry has backed polluters for decades. Now, amid growing pressure, Wall Street says it’s going green
Wildfires burned nearly 10.4m acres across the US last year. The most costly thunderstorm in US history caused $7.5bn in damage across Illinois, Iowa, Nebraska and South Dakota. As the climate crisis swept the globe on a biblical scale it left in its wake a record number of billion-dollar disasters.
And yet out of these ashes has emerged an unlikely savior: Wall Street. After decades of backing polluters and opposing legislation to rein them in, finance says it’s going green.
A steadily growing trend in investment went fully mainstream in 2020 as a record number of corporations pledged to go “net zero” and move to cancel out the carbon emissions they produce to halt a catastrophic rise in global temperatures.
The tectonic corporate shift is being led by a strategic detour by some of the world’s biggest investors. It used to be the protesters outside Davos and annual shareholder meetings who talked about greenhouse gases and rising sea levels. Now it’s the bankers. And when money talks, corporations listen. But can Wall Street really save the planet? There are at least positive signs that they are trying.
Joseph Stiglitz, a Nobel laureate and Columbia University economics professor, doesn’t think Wall Street has a choice.“People used to use the analogy that climate change was like boiling a frog and we wouldn’t notice it until it was too late,” said Stiglitz. “Well, we have been boiled. We are trying to jump out of this.”
Countries including the UK, France, Denmark and New Zealand have pledged to go net zero by 2050 and the EU and Canada are working on their own plans.
The financial calculus is obvious. As the climate crisis continues, the risk of doing nothing is rising and the money is moving.
In 2013 Exxon was the world’s largest company, last year it dropped out of the Dow Jones Index, the blue chip index that is synonymous with the “stock markets” for many investors. Last year it lost $22bn and the company, which for decades denied the climate crisis was real and actively lobbied against change, has been forced to elect climate activist investors to its board.
By September last year more than 800 cities, 100 regions and 1,500 companies had pledged to decarbonize their societies and economies, according to the research group Data-Driven EnviroLab and the NewClimate Institute. Between them those companies have combined revenue of over $11.4tn and are responsible for 3.5 gigatonnes in greenhouse gas emissions, an amount greater than India’s annual emissions.
More than 1,000 companies have signed on for the Science Based Targets initiative, an initiative to help corporations set measurable emission standards run by the CDP (formerly the Carbon Disclosure Project) non-profit organization, the United Nations and others. An analysis of 338 of those companies – including Mastercard, the Italian energy company Enel and UK supermarket chain Tesco – found they have reduced their emissions by 25% since 2015, a difference of 302m tonnes of CO2 equivalent, the same as the annual emissions from 78 coal-fired power plants.