European Investment Bank to phase out fossil fuel financing | Hacker News Reader

European Investment Bank to phase out fossil fuel financing

theguardian.com

75 pointshekocelsius31 comments

The contrast with the other front page article "Paypal stops payouts to pornhubs models" is interesting. On one hand we don't like it when banks use their power to implement their moral panic regarding otherwise legal activities, on the other it's nice that they use it to avoid financing things we consider bad for the commons.

My guess is there's more to it than that. I think that they have less confidence in the financial prospects of those projects as well.

One categorial difference is that the Paypal case is discrimination against individuals.

It's worth remembering that the commons isn't well defined either. Lots of people view the current policy proposals of environmentalism as anti-poor and handouts to the third world. Whether you agree with that framing or not, there is plenty of data that shows mitigation and not outright prevention is an equally valid strategy to climate change. What you're really saying is that it's okay this time because it's an issue you agree with, a more neutral framing would be "...it's nice that they use it to avoid financing things we consider bad."

Not sure what's supposed to be interesting about that.

It is good when good things happen and bad when bad things happen, yes.

We don't need to lock ourselves into some kind of universal ethical conclusion here.

They’re also entirely different issues. One is about handling to payment for people who are not really harming anyone (or at least not doing massive environmental damage). The other is... doing massive environmental damage.

Cool, so I guess we just downvote stuff we disagree with.

The EIB is a multi-state investment bank, owned by the European Union and carrying out the investment aims of the EU -- all of which are therefore political acts, based on political decisions.

> The decision to prioritise renewable and efficient energy follows a policy promise by the incoming European commission president, Ursula von der Leyen, to turn the EIB into a “climate bank”, unlocking a potential €1tn in funds to help move Europe’s economy toward cleaner energy.

PayPal is a private company providing (in the EU at least) retail banking services to businesses and individuals.

Many consider porn bad to the commons as well.

For the past five years O&G E&P companies have been realizing significant loses in a shale driven production world. Where NA producers are quick to turn on the taps and drown the market in oil once $WTI hits $55/bbl. with this comes instability and loss of Wall Street backing. Banks are labeling this as a way to show them in a good light. I.e. ‘fight climate change.’ The actuality is that the want better returns in a more stable environment.

I apologize for poor formatting on my phone.

Exactly this, and if looks good from a social perspective that's just an added bonus.

Soon decisions like this won't make headlines because it will be normal not to invest in industries based on increasing suffering.

Do we support investing in blood diamonds, no matter how profitable?

$XLE for those that want to pick up cheap stocks.

Till there's a global solution to the energy problem we'll need oil. Existing solutions are nowhere close to being sufficient, therefore divestment will have no impact on the amount of oil burned. It's ridiculous to think that clicking a sell button on some assets will fix global warming, that's not how the world works.

https://en.wikipedia.org/wiki/World_energy_consumption

As Bill Gates says, we need to fight two fronts of misinformation: a) that global warming is not a problem, and b) that it is an easy problem.

> $XLE for those that want to pick up cheap stocks.

A nuance is that you don't want to buy into these stocks while people are moving away from vice stocks.

However, once the trend is stabilised and there are no more marginal investors to adopt a vice-free portfolio, then you should buy all the vice stocks as they will have a more favourable discount rate.

It's already the cheapest segment of the S&P 500: https://www.gurufocus.com/sector_shiller_pe.php

Timing the exact bottom is hard.

I remember immediately after Deepwater Horizon, RIG dropped something like 50% to $40 a share or so. I invested heavily in it, proud of my own savviness and cynicism.

That worked out well.

I found that investing in BP when people were at their most pessimistic about the well being capped did work well.

Unfortunately, following up that success by buying into TEPCO once it had dropped by half after their accident turned out not to be a good move.

However, one may console oneself that it was a public service in providing some cash to the Japanese pension funds, proverbial widows and orphans and whatnot that were selling at that time.

IMHO the price will only be low while people are selling. You dont want to wait for that downward pressure to stop. You never know how fast it will bounce back.

> It's ridiculous to think that clicking a sell button on some assets will fix global warming, that's not how the world works.

It's ridiculous to think that reduced demand for some stock will not reduce its price.

More concretely, the more banks and people make gestures like this, the easier it is for politicians to reduce subsidies / increase taxes for fossil fuels, which will definitely reduce the amount of oil burned.

My point is that the stock price has nothing to do with the amount of oil burned. Exxon Mobil could trade for $0.01, doesn't matter, they will still sell oil.

The second part is true, it is shaping the narrative somewhat. We'll need much more hardcore stuff than just twiddling the narrative, though.

Well, it is possible that there will be real restrictions on producing or selling fossil fuel that will progressively eliminate demand for their product. In which case, their assets are not worth what they might previously be assessed at.

P/E is either backwards looking or based on estimates of future earnings, and the future often changes.

I can't say who's got a more accurate view of the future, but the Aramco IPO suggests that the Saudis are anticipating people getting serious about global warming before too long and they want to at least test the waters.

Of course there will be pressures. Europe is already taxing oil at +100% compared to the US (i.e. the prices of gasoline are 2x higher).

But my point still stands - humanity needs energy.

Also, of course, this is not an investment advice! You may lose 100% of money yada yada.

>It's ridiculous to think that reduced demand for some stock will not reduce its price.

That's the point. Stocks are priced according to discounted future earnings. if the price goes down but the future earning prospects hasn't changed, it means I can get future earnings for cheaper. In other words, my rate of return has improved.

Less money invested in oil means more money to invest in alternatives, which is what they're saying they will do.

Well, people being able to heat their homes, drive places, have abundant inexpensive food and all the other things that oil allows tends to reduce suffering.

Is it possible for an industry to increase suffering in a free market? Blood diamonds involve slavery and coercion so that is not really the same. If free people are making free choices to engage in a transaction, it would make sense that they would both only choose things that decrease their own suffering.

This is a meaningless question without a definition of freedom. Libertarians often assume that everyone implicitly sees freedom as black and white and the threshold is obviously in the same spot. But it seems to me that everyone engaged in commerce spends the most effort possible avoiding direct competition by exploiting every aspect of every situation that is not completely free.

Consider grocery stores in a typical moderate-sized city and suburbs, where there are 3-4 major chains. You might assume this is a pretty competitive situation, and they should have prices that are pretty close to each other. But the equilibrium seems to be that each one has a different (and frequently changing) set of products that are noticeably cheaper than the others, and a complementary set that are significantly more expensive. A logical explanation of that would be that as long as they guard their prices closely so you can't compare them easily online or whatever, once you go to the store, you are not completely free. If you are buying one thing because it's a good deal, it's easier to buy other things there as well.

The above is something I've noticed first hand, but it's also something I read about years ago from some economist' research paper.

Everything in business is about figuring out how to deny customers freedom at some level. Arguing that the lack of freedom is trivial in a particular example is missing the point that it's a continuous spectrum from trivial inconvenience that makes you spend a dollar more, to brutal slavery, depending on where business activity is bounded by ethics, mores, regulation, etc.

What I'm trying to say is that the term "free market" is always burdened with all sorts of unstated assumptions, so you can't communicate very well by assuming people interpret it the same way.

By "free" I just mean not under the threat of physical violence.

I'm not sure about the grocery store example. I can think of several different grocery stores near me that have wildly varying prices for similar items. Whole Foods is a lot more expensive than Aldi, for example, and they don't really hide it. They're catering to a different market and offering a certain social cachet in addition to the food that some buyers appear to feel is worth it, as they are free to do.

> A logical explanation of that would be that as long as they guard their prices closely so you can't compare them easily online or whatever, once you go to the store, you are not completely free. If you are buying one thing because it's a good deal, it's easier to buy other things there as well.

Of course you're still free while you're at the store! Being mildly inconvenienced is not an impingement on freedom. Freedom doesn't mean everything is handed to you at maximum convenience. It means it a choice that you can make.

My main point is freedom is not a binary thing. Suppose that instead of a slight inconvenience, you have to leave your state. Or you have to move to another state. Or suppose that you have to move to another country. Or suppose that you have to give up everything material and flee your country. Or suppose that you have to sacrifice your family to escape the constraints. Or suppose that you can only kill yourself to escape your situation. It's a matter of degree, not of kind.

The European IBank is an arm of the European Central Bank. The mandate of the ECB is to provide a stable currency, not to combat climate change. That is something for the European parliament and the governments of EU countries to tackle.

That is not the mandate of the EIB and has never been. From their website: “The European Investment Bank is the lending arm of the European Union.”

From the first paragraph on Wikipedia: “As a ‘policy-driven bank’ whose shareholders are the member states of the EU, the EIB uses its financing operations to bring about European integration and social cohesion. It should not be confused with the European Central Bank.”

About their mission: “ As the ‘Bank of the European Union’. the EIB's mission is to make a difference to the future of Europe and its partners by supporting sound investments which further EU policy goals.”

So this is exactly the kind of thing they do.

Where’d you get that? The EIB is from the 50s, and includes non-ECB countries. It’s not an arm of the ECB.

"Development banks" have more of a fiscal than monetary responsibility.

Just like with IMF which is supposed to keep the world's monetary system stable (more like central banks/monetary side of things), and the World Bank which is supposed to induce progress (more like governments/fiscal side of things).

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