The Case For Fossil Fuel Engagement

  • Date: 03-Mar-2021
  • Source: Forbes
  • Sector:Oil & Gas
  • Country:Gulf
  • Who else needs to know?

The Case For Fossil Fuel Engagement

Engagement with fossil fuel companies can help support the low-carbon transition while supporting ... [+] current energy needs.



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This piece evaluates the merits of engagement with fossil fuel companies. My prior article discussed the benefits and importance of the divestment movement.

Fossil fuel divestment has grown into a socially influential and impactful movement. It has unquestionably succeeded in changing the conversation around the future of fossil fuels. However, when considering direct financial impacts and avoided emissions, divestment's effectiveness has been less clear. Since the Paris Climate Agreement, global banks have provided over $3 trillion in fossil fuel funding.

Limits to divestment?

A coordinated divestment movement has the potential to increase the cost of capital for emitters. However, for individual financial institutions seeking to accelerate decarbonization, a pure divestment approach may have limitations. In largely efficient securities markets, for every seller there is a buyer at the right price. Thus, a firm may dump their fossil fuel shares only to see them snapped up by a less climate-conscious investor. This issue occurs debt financing too, for when larger banks divest from international extraction projects, national banks often step in. These state-run banks are