World's top banks pour $1.9T into fossil fuel financing since 2015 | Hacker News Reader

World's top banks pour $1.9T into fossil fuel financing since 2015

banktrack.org

71 pointstito49 comments

This is probably due in part to private investors asking their banks to invest their money for them without regard to environmental issues.

Will you blame the postal office for delivering a bomb if it's properly packaged ? Probably not. The same way, I feel it's stupid to blame the banks for investing their customers' money where the yield is the largest when that is specifically what the customers' expect.

Put huge taxes on fossil fuel investment worldwide or give tax breaks for green investments, and money will go to greener areas. But governments don't want that either.

What yield? 0.002%?

Investing in stocks has long term yields of like 7% or 8% per year if you invest in an SP500 (or similar) index fund, from what I know. Admittedly I am not an expert, but the documentation I read before investing myself lets me think that 7% or 8% is quite standard for 25 year investments.

I'm not sure what you mean with 0.002%. Maybe bonds?

> I'm not sure what you mean with 0.002%. Maybe bonds?

This is 1000x lower what a standard savings account pays. I wouldn't look for any meaning in the parent comment beyond economic illiteracy

I was off by a 0, but 100x better than you. Not a fan of the snide remarks.

Again, the idea that big banks are chasing returns for their depositors is false.

WellsFargo: 0.01% https://www.wellsfargo.com/savings-cds/rates/

BofA: 0.02%

Citibank: 0.04%

I was surprised by Citibank being so high.

These are for basic savings with minimum deposits and don’t take into account any fees.

Agreed! No need to blame anyone. Let’s solve the problem though, will need to have everyone involved.

> banks for investing their customers' money where the yield is the largest

Banks do not invest using deposits. This fiction needs to end. When they make the 1.9T in loans, they are making new money.

If the package has been labelled "bomb", I would blame them. And that's the point here, they know what it's going to be invested in.

Yes, it's commercially imperative to trade, unless it doesn't. And people getting aware of it and complaining is one way, it becomes more of a liability.

It is really a tragedy of the prisoner's dilemma. If a single bank decides to do the right thing and not offer fossil fuel investments to their clients, their market share will diminish. The people who made the right call will be fired by their superiors (ultimately the shareholders), who will see the bank shares decline compared to the competitors who didn't make the moral decision.

The end result: the people who made the call for the long term good won't be around to actually see it implemented.

The problem needs to be fixed in a broader scope. The entire corporate incentive structure is broken.

I really want a carbon tax especially on investment, it's the only solution to the investment problem, isn't it?

But imagine the riots in France as the price of gas goes up.

I can also imagine the News Corp/Sinclair spin on it in the USA.

It has to be supplemented with other programs to take the load off of average people. A really disproportionate percentage of the burden needs to be taken on by investors. Doesn't it? What would that entire package look like?

>A really disproportionate percentage of the burden needs to be taken on by investors.

Fifty four percent of equities are held by households and mutual funds. Add in another 15% for pensions, and you arrive at roughly 70% of the stock market belonging to people saving for retirement. Investors are the "average people."

Source: https://amp.businessinsider.com/images/54aff08969beddb2240a8...

I'm afraid that people able to save for retirement are less and less average these days ?

This report says that 1 in 5 have saved less than $5000 for retirement, which means that 4 in 5 have a substantial retirement investment. Although there is a big problem brewing (1/5th of all Americans is a huge number of people), those who would stand a lot to lose if something went wrong in the financial world are still the majority.

https://news.northwesternmutual.com/planning-and-progress-20...

Hmm, right, I guess that partially paid mortgages still count as savings, as they should ?

More than $5000 is not a substantial amount

Maybe not to someone who has a million dollars, but $10,000 to someone who has $10,000 is 100% of their net worth. "People are not saving enough for retirement" and "people would get significantly hurt if their retirement savings were damaged" are not contradictory statements.

Savings would not be significantly damaged if 1-1.5% in gains was missed on a $10,000 on a fossil fuel divested portfolio. That might be a significant overstatement of the differential.

Disclaimer: 1-1.5% would make a big difference over time

> ... and you arrive at roughly 70% of the stock market belonging to people saving for retirement. Investors are the "average people."

This only applies to the USA, which is a major outlier.

Global stock ownership in 2009 was only around 500 million[0] people from the total world population which was 6.8 billion in 2009. That's 7.23%.

[0] https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1457482

> But imagine the riots in France as the price of gas goes up.

Most of the gas price in France is taxes, so a carbon tax on gas wouldn't change much. On the other, a carbon tax on imported Chinese crap and American junk food, why not...

Indeed, one of the complaints of the rioters was that only 10% of the new tax was going to be reused in programs that help poor and average people to drive less. And at the same time, there was still no tax on kerosene for planes (that poor people cannot afford anyway).

You want to tax me for betting on society not abandoning fossil fuels?

I'm not the bad guy. The people refusing to abandon fossil fuels are.

As I understand it, there are two main ways to invest in fossil fuels - stocks & bonds. Buying stocks in fossil fuel companies doesn't finance their continued operation, so probably not much point taxing those. But buying bonds from a fossil fuel company is directly funding their operation, so I would assume this is where the theoretical tax would be applied?

By my calculation that is 234GW of nuclear power, or about half of US electricity consumption.

https://www.eia.gov/todayinenergy/detail.php?id=38572

https://www.synapse-energy.com/sites/default/files/SynapsePa...

The headline itself commands attention because it suggests a target to offload blame upon amidst this ongoing climate change narrative. But how many of us manage our own retirement fund (day-to-day)?

The 410(k) can exist and guarantee returns because of things like fossil fuel financing. Over the past several generations, resources have been funneled into railways, roads, extraction technologies, refineries, fleets, grids, etc. This infrastructure has been established for some time now and continues to grow, but perhaps at a reduced rate because emissions now appear to be a threat. Sudden regulation to the end of the drastic reduction of fossil fuel deployment is not compatible with the expected economic growth that has established people's desires and standards for an idyllic life.

The surplus generated by the energy density, abundance, and accessibility of fossil fuels is the reason the aging citizen can anticipate monthly pension deposits or dividends sufficient enough to keep them well fed, housed, traveling, and medically sound. It is a comfortable method of living out the final years of a life spent participating in an economy that can now serve them as a reward for their service to it.

The necessary large scale transistion to emissionless renewables interrupts long term structured and predictable payment plans on the very grids and refineries that have granted us financial security.

Ethical investment funds do exist, and these explicitly don't invest in fossil fuel industries. There are also ethical superannuation funds (in the Australian context). Individuals can choose a direction for their investment.

Even if everyone drove an EV, a fossil fueled charging source would continue to add to the problem. Solar/wind charging will likely be the case for transportation batteries, but replacing the fossil with nuclear for heavy industry could still grant us our healthy 401(k) payouts.

Can anyone do back of napkin math on what $1.9T could buy in terms of wind/solar energy? How many homes that could power?

21,000 of Tesla’s huge battery system in Australia ($91M) [1]

[1] https://www.theguardian.com/technology/2018/sep/27/south-aus...

edit: thanks for the math save!

1,900,000,000,000 / 91,000,000 = 20,879

nice save! holy crap that’s a lot of batteries.

Google: "((1 T) / $35000) * $1.9 Trillion" = 54 285 714.3 teslas

"YOU GET A TESLA! YOU GET A TESLA! EVERYBODY GETS A TESLA!"

>Can anyone do back of napkin math on what $1.9T could buy in terms of wind/solar energy? How many homes that could power?

I'm not sure this question is relevant. First, because it isn't one or the other. Second, because the renewable energy sector also has vast amount of financing, but it's a smaller industry.

I'm not sure the point of the article, outside of the fact that it demonstrates that despite our best efforts, the fossil fuel energy sector is expanding because we demand more energy, and energy is becoming more expensive.

“Global clean energy investment totaled $332.1 billion in 2018.” [1]

Compared to $1.9T/~3 years, $630B on fossil energy investments per year.

[1] https://about.bnef.com/blog/clean-energy-investment-exceeded...

So that's ~$0.380 T$/y for "just" the "top banks".

To compare with IEA countries (excludes Russia, OPEC, China...) that spent 0.0189*(0.21+0.16)= 0.008 T$/y on energy efficiency and renewables...

https://www.iea.org/statistics/rdd/

R&D isn't the same as financing infrastructure..

Infrastructure is certainly part of development...

I think this is going to change radically in the next few years as the big banks wake up to the stranded assets problem. In fact, from what I understand it is already happening inside the banks, but hasn't worked its way up to where the decisions happen.

World's top lenders help finance the industry that powers the world? I know we're supposed to grab our pitchforks but come on now.. 1.9T into wind and solar would produce a fraction of the power output and they have obligations to their clients

Interesting to start with more of a null hypothesis here. What’s the historical investment level? Does this amount actually reflects a complete collapse of fossil investments?

BankTrak apparently has been doing these report cards for 10 years. Here’s the 2016 edition: https://www.banktrack.org/campaign/shorting_the_climate_2016...

“ In just the past three years, these banks have sunk $42 billion for companies active in coal mining; $154 billion for the 20 largest coal-fired power producers; $306 billion for companies that drill extreme oil; and $282 billion for companies building liquefied natural gas export infrastructure.”

Sounds like a similar 3 year period, total is $0.78T tho. So...increasing? Possible my assumption that these are comparable is wrong.

Reading a book on related issues right now, and it suggests that's what is to be expected - the demand on energy is growing, but also the costs of acquiring fossil fuels are growing and infrastructure decay is catching up with the industry. So no other choice but to run faster even just to stay in the same place.

A significant fraction of this money went into US tight oil, which seems to have effectively negative power output, considering that they've yet to turn a profit ?

Probably mostly syndicated loans and bonds that the banks sell on to other investors. I doubt that more than a small fraction of the loans are held by the banks. So the more relevant question is who is holding the debt?

$1.9T in financing (about $500 billion a year) plus $5T a year in government subsidies worldwide.

Investment in fixing our ecological crisis and climate change is minuscule to our investment in our destruction.

For example, US spends about $600 billion a year to subsidize the fossil fuel industry which is $6T in 10 years.

For comparison, Elizabeth Warren wants to spend ONLY $2T in 10 years on climate. Andrew Yang wants to spend ONLY $2.5T in 10 years. Bernie Sanders is the only one serious about climate and wants to spend about $10T over ten years.

In other news, the Fermi Paradox has been solved.

Imagine $1.9T investment into fusion?

“Investment in nuclear power declined by nearly 45% last year to USD17 billion” in 2017 :(

http://www.world-nuclear-news.org/NP-Investment-in-new-nucle...

ITT: People have no concept of return on investment.

Funny that - has the last financial crisis shown us that these "top US banks" (helped by the US government) had a good grasp on this concept or maybe the opposite ?

And a significant fraction of this goes into unconventional oil projects like the US tight oil industry, which is likely NOT EVEN ENERGY POSITIVE, considering that it has yet to turn a profit ! (Ditto for US ethanol.)

But driving your personal car is your god-given right, isn't it ?

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