A new year is around the corner. Time to make some predictions about how financial institutions will respond to the growing threat of climate change, stranded assets, and eroding social license will pose.
UK banks’ dirty coal secret ends: Since Paris, UK banks have lent £25 billion (₹2.4 lakh crores) to global coal expansion. The UK hosts COP-26 in 2020 and won’t want a skunk at the Garden party. In 2020 HSBC, Standard Chartered, Royal Bank of Scotland and Barclays will revise policies to end coal.
Coal becomes nearly uninsurable: 19 of 116 global coal policies come from insurers. Four US insurers announced in 2019 alone. In 2020 the next giants – AIG Insurance and Lloyd’s – will join the party leaving East Asia as the insurer of last resort.
World’s largest coal investor ditches the Blackrock, the American global investment manager. With $17 billion in exposure Blackrock faces reputational risk as coal policies become a minimum for climate cred. The pressure is mounting & engagement alone won’t cut it. In 2020 they restrict coal.
Central Banks restrict coal: Stress tests alone won’t pass muster as climate action. In 2020 Central Banks’ will limit to fossils starting with coal on their own balance sheets. One or more of De Nederlandsche Bank (Netherlands Central Bank), European Central Bank, Bank of England, Swiss National Bank, Banque de France (Bank of France), will lead.
Fossil fuels become the new coal: Financial institutions have made coal a unique ‘bad’ a-la asbestos or tobacco. In 2020 that will expand to all fossil fuels with the number of FIs with a coal policy that expands to all fossil fuels growing.
The world’s largest financer of fossil fuels finally shifts. JPMorgan Chase Bank is the worst of the worst. With Goldman Sachs announcing a new policy and other American banks eyeing ‘Paris + 5’ COP-26 as the time to clean up, expect Chase to move in 2020.
Japan & South Korea End overseas coal. These 2 countries risk becoming international pariahs if they continue to be the number 2 & 3 financiers of coal overseas. With the 2020 Olympics in Japan, P4G summit in Seoul & pressure from UN Secretary-General António Guterres, they’ll finally act in 2020.
A Democrat will win the White House with an aggressive climate policy that includes financial regulation. When they do, they’ll rely on Dodd-Frank Wall Street Reform and Consumer Protection Act, The Financial Stability Oversight Council (FSOC) & Federal Reserve System to implement restrictions on fossil with guidance from advisors like Graham Steele and Gregg Gelzinis.