Fossil companies banned
The companies most often excluded due to climate change are Cenovus Energy, Suncor, China Energy and ExxonMobil. They all work in the fossil sector. By extracting oil and gas, they contribute to global warming thanks to the high CO2 emissions associated with their product. The damage caused by their activities is therefore reason enough for many financial institutions to no longer invest in such companies. Blom: “Specifically for regulated institutions, supervisors are increasingly pointing out the climate risks for the financial sector and the effects of investments in the fossil sector. From that point of view, divestment makes more and more sense.”
Blom noticed something else striking. “The fossil sector is not only excluded from a climate perspective, the violation of human rights is also given as a reason. It is a combination that often occurs. You see this, for example, at ExxonMobil, where controversial business practices are also cited as a motivation for no longer investing in it.”
This dual reasoning is also visible in non-fossil companies, according to Merel van der Mark, coordinator of the Forests and Finance Coalition. “For example, the dataset shows that JBS, the world’s largest slaughterhouse and one of the biggest drivers of deforestation and rights abuses in the Amazon, is also the most excluded company in the bad business practices category. This should be a warning sign to anyone considering doing business with the company.”
No sector exclusions
While the database of business exclusions provides a good basis for gaining insight into the behavior of financial institutions, a number of questions still remain open. For example, the list of exclusions only provides insight into individual companies, but does not contain information about complete sector exclusions. Nothing is known about the companies in which institutions still decide to invest. This makes it theoretically possible that a certain financial institution decides to no longer invest in one fossil company, but still provides money to another. Optimists would praise that one divestment and prefer it to none, pessimists, on the other hand, might label it as a disguised form of greenwashing.
In addition, the database does not provide insight into constructions through which institutions indirectly contribute to the financing of questionable companies. For example, research platforms Follow the Money and Investico recently reported on the banks ING and ABN Amro, which indirectly provided fossil fuel companies through bonds while they publicly believed they wanted to stop investing in new oil and gas projects. It is expected that it will be difficult from an analytical point of view to expose such constructions, as they are very situation-dependent and financial institutions will not voluntarily disclose them.
Keep expanding
According to Blom, it is important to continue to supplement the list with new exclusion dates from more financial institutions. “The more institutions are included, the more valuable the database becomes. For example, it would be good for the Netherlands if ING and Rabobank agreed with their divestment policy. We are also considering expanding the database to include sector exclusions.”
Ultimately, the goal of Milieudefensie and the other NGOs is to generate momentum on both sides. On the one hand, from the companies, which can see the divestment as a signal and can organize their business operations in a more responsible manner. On the other hand, from the financial institutions, which can copy each other’s behavior. Blom: “We hope that they will look at the list, see that other institutions exclude a certain company, and wonder: why don’t we do that? It then becomes a kind of benchmark within the sectors. For example, we heard from a colleague abroad that a financial institution has spontaneously offered to share their list, based on our database. Of course we like to celebrate that.”
Climate Act
“And Milieudefensie also wants a climate law that obliges the entire financial sector to draw up a climate plan that is in line with the Paris climate agreement. Minister Kaag (finance, ed.) has promised to start a consultation on this in the summer. This has not happened yet, but we would like to see it happen.”