The case for fossil fuel firms funding climate finance 💸

This is an excerpt of the Reuters Sustainable Switch newsletter that goes into the heart of how companies and governments are grappling with climate change, diversity, and human rights. To receive the full newsletter in your inbox three times a week, subscribe here.

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All eyes are on the energy sector after the European Union called on fossil fuel companies to pay for fighting climate change in low-income countries 💰, while big oil executives take part in one of the world’s largest energy conferences in Houston, United States, this week.

The fossil fuel industry ⛽ should help pay for fighting climate change in poorer countries under a United Nations target, EU countries' foreign affairs ministers said.

This year's U.N. climate summit in Baku, Azerbaijan, in November, is the deadline for countries to agree on a new global target for how wealthy, industrialized nations should pay poorer ones to cope with the most severe impacts of climate change.

Providing climate finance

To attempt to address the spiraling costs of deadly heatwaves 🌡️, droughts and rising sea levels, the EU is preparing to argue that the new climate finance goal cannot be made up of public funding alone.

The statement, a draft of which was previously reported by Reuters, said the EU will also continue to demand that large emerging economies and those with high CO2 emissions and per-capita wealth – like China and Middle Eastern states – should pay towards the new U.N. climate finance goal.

The EU this week is calling for "additional, new and innovative sources of finance from a wide variety of sources, including from the fossil fuel sector and other high-emission sectors, to be identified and utilized to provide climate finance," EU member state foreign affairs ministers said in a joint statement, published during a meeting in Brussels.

CERAWeek

Speaking of the fossil fuel sector, top oil executives and ministers descend on Houston this week for one of the world's biggest energy conferences emboldened by blockbuster mergers, stable oil prices and less pressure for a large-scale move to clean fuels.

The annual CERAWeek conference comes as demand for oil and gas continues to rise 📈 alongside solar, wind and biofuels.

Energy markets have accommodated a reordering of global flows as customers turn more to regional energy suppliers or live with longer seaborne supply chains.

"A remarkable thing is the (price) stability, given the geopolitical turmoil," said Daniel Yergin, vice chairman of conference organizer S&P Global and a Pulitzer Prize-winning author on global energy.

"When demand was down and prices were down, it was very easy to see a way towards energy transition, but with Russia/Ukraine (war) and price shocks, energy security is back on the table," Yergin added.

‘The fantasy of phasing out oil and gas’

Climate concerns were reflected in the conference sessions on carbon sequestration technology and hydrogen fuels, which have become two of the oil industry's favorite means of addressing global warming 💚.

The role of artificial intelligence in energy production and carbon emissions are also prominent sessions this year.

Energy consumers' willingness to pay up for clean fuels or for new technologies to address emissions "is a growing issue, as is the ability to generate adequate return on investment" by energy companies, said Joe Scalise, consultancy Bain & Co's head of energy and natural resources.

In fact, the head of the world's largest energy company urged a re-set of global energy transition plans in remarks to oil and gas executives at the conference.

"We should abandon the fantasy of phasing out oil and gas, and instead invest in them adequately, reflecting realistic demand assumptions, as long as essential," Saudi Aramco CEO Amin Nasser said, in remarks that drew applause from the audience.

In Conversation

Ellie McLaughlin, not-for-profit advocacy group Positive Money’s senior policy and advocacy officer, shares her thoughts on the Bank of England subsidizing fossil fuels:

“In accepting fossil fuel assets as collateral against its lending, the Bank of England is essentially using the powerful tools at its disposal to provide a hidden subsidy to this sector.

Not only does this mean public money is being used to prop up an industry detrimental to our future on this planet, but it fails to account for the fact that fossil fuel holdings are likely to become stranded assets - which would leave the public to foot the bill when they become worthless and banks crash the economy again.

Excluding the most environmentally damaging assets, starting with fossil fuels, from this lending framework is the only way for the Bank of England to meet its responsibilities of maintaining financial stability and supporting the transition to net zero.”

ESG Lens

The U.S. Securities and Exchange Commission (SEC) on March 6 approved a new rule for public companies to disclose emissions and other climate-related details. The new climate-disclosure regulations should boost demand for services of the Big Four accounting firms and more specialised reviewers, and could sharpen a rivalry between the two camps, executives and analysts said.

"We anticipate more and more that our clients will be asking us for help" preparing so-called 'attestation' reports required under the new climate-disclosure rules,” said Amy Brachio, global vice chair for accounting firm EY.

She said further that EY and other big audit firms could have an edge because corporate financial officers will now be responsible for climate reports and are used to working with firms like hers. Currently much of the emissions reporting is overseen by corporate chief sustainability officers. Chief financial officers and others are "very used to working with the Big Four," she said.

ESG Spotlight

Today’s spotlight shines a light on a new climate-related art piece 🎨 by popular street artist Banksy in Britain’s capital.

The new artwork has appeared in London, using green paint sprayed across the side of a building to mimic the foliage of a real, heavily pruned tree that stands a few meters in front of it.

A photo of the mural was posted on Banksy's official Instagram account on Monday, where the artist usually claims responsibility for works of art to his more than 12 million followers.

When viewed from certain angles, the green paint lines up with the tree's bare branches to represent its leaves 🌳. The work includes a stencil, typical of Banksy, of a person holding a spraying device, dripping in green paint.

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