Leading investors appeal to G20 governments to end fossil fuel subsidies
A coalition of leading investors – with a total of $2.8 trillion in assets under management – issued a joint statement on Wednesday 15 February, calling on G20 economies to phase out fossil fuel subsidies by 2020.
The group of 16 leading investors and insurers, including Aviva Investors, Aegon Asset Management and Legal & General, signed the statement which described government subsidies for fossil fuels as a “key concern” to the finance sector.
The statement said: “They increase the risk of stranded fossil fuel assets, decrease the competitiveness of key industries, including low‐carbon businesses, and negate the carbon price signals many of us have been calling for. They are also notoriously inefficient from an economics standpoint.”
As a result, the investors have called for “G20 governments to establish a deadline for the phase out of fossil fuel subsidies and public finance for fossil fuels”.
In 2016, the G20 set out the following objectives to address climate change:
- Enhance the ability of the financial system to mobilise private capital for green investment.
- Build well-functioning, open, competitive, efficient, stable, transparent energy markets, and shape an affordable, reliable, sustainable and low greenhouse gas emissions energy future.
- Achieve sustainable development and strong and effective support and actions to address climate change, and the timely implementation of the Paris Agreement.
Meryam Omi, Head of Sustainability and Responsible Investment Strategy at Legal & General, said: “The current level of inefficient subsidies and lack of transparency are jeopardising the global goal of meeting the Paris climate targets and of ensuring a secure, healthy and reliable energy system.”
Specifically, the investors called for governments at the July G20 Summit Meeting in Hamburg, Germany to establish:
- A clear timeline for the full and equitable phase-out by all G20 members of all fossil fuel subsidies by 2020, starting with the elimination of all subsidies for fossil fuel exploration and coal production.
- A clear timeline for the phase out of domestic and international public finance for oil, gas and coal production by 2020.
In addition, they urged governments to commit all G20 members to complete fossil fuel subsidy peer reviews by the end of 2018, building on the leadership of China and the United States in 2016.
The investors hope that the G20 will also build momentum achieved by a number of major milestones in 2016 in the fight against climate change, namely the Paris Agreement.
The statement said: “We believe this momentum provides the G20 with a unique opportunity – and responsibility – to finally deliver on their repeated pledge to end fossil fuel subsidies.”
Over the past few years there have been multiple reports outlining the vast sums of money dedicated to fossil fuel subsidisation; for example, the Overseas Development Institute and Oil Change Institute’s report which found that members of the G20 are providing $452 billion per year on fossil fuel production subsidies.
Shelagh Whitley, Head of the Overseas Development Institute’s Climate and Energy Research Programme, said: “Global investors and insurers are sending a clear message to governments that burning public money through fossil fuel subsidies is not just bad for the planet, but bad economic policy too…G20 Ministers must heed investor voices, and ensure that the leaders of their countries commit to a firm deadline to end fossil fuel subsidies at the G20 Summit in Hamburg later this year.”
The 2nd annual Sustainable Investment Forum will unite more than 350 policy makers and representatives of the private and public sector to discuss how to scale-up climate finance to achieve the aims of the Paris Agreement, on 19 September 2017 in New York. For more information click here.