Climate Finance Climate Institutions

Principles for Responsible Investments (PRI) writes to International Energy Agency (IEA) about rebadging of fossil fuel scenarios: “We urge you to do better… The IEA cannot be derelict of this responsibility”.

Punch club

On my left: the United Nations Principles of Responsible Investments (UNPRI). Founded in 2006. The UNPRI is not your average United Nations agency. In fact it’s not. It has two board members from UN organizations, but the other eleven represent some of the largest asset managers in the World. About $20 trillion worth of assets are managed by PRI members. That’s a lot of zeros. Basically, people who manage your portfolio of stocks and bonds, possibly your pension fund. It’s more like an independent guild. It doesn’t get funding from the UN, and it represents the interests of its members and ultimately yours. There is currently a big move towards ethical and responsible investing. From pension funds, down to individual investors, people are no longer comfortable putting their hard earn cash into polluting industries with questionable social and environmental practices. Investors want juicy returns on their portfolio of stocks but they are increasingly wary of the catastrophic impacts of climate change on the planet and on the companies they own. PRI members have been arguing that financial markets are underestimating the costs of climate change to businesses.

United Nations Principles for Responsible Investments

On my right: The International Energy Agency (IEA). Founded in 1974. The IEA is an “autonomous” inter-governmental organization that is part of the World’s club of rich countries, formally known as the Organization for Economic Co-operation and Development (OECD). Its members include the US and some of its friends (Mexico and Turkey), and the other developed countries. The IEA was created in the aftermath of the 1973 oil crisis, when planners thought it was a matter of years before we were going to run out of oil for our flying cars. Oil security is to this day the core concern of the IEA. The IEA is best known for its compendium of energy statistics, market moving oil reports and annual “Global Energy Outlook”. The Global Energy Outlook is quite the organizational and intellectual exercise as it covers long term projections of the World’s energy production, consumption, trade and investments. It’s the mothership of the agency’s glossy publications.

World Energy Outlook 2019 by International Energy Agency

The letter in plain English

My experience of UN folks is that they are usually unctuous and mellifluous (unless they are dealing with climate consultants like me). It is amusing to see the Chief Executive Officer of PRI sparing no punch in her letter to the Executive Director of the IEA. They’re on a first name basis. It’s all good, right? I bet at EIA they are in righteous outrage mode. 🥊

Basically, in plain English, this is what the letter says: “Yo, we wrote you a letter in April to get your act together about your nonsense fossil fuel scenarios. Several months later, you do nothing while planet is burning. You really suck at your job.”

Of course it’s all couched in diplomatic parlance, but unless the guy is daft (he’s very smart), he must have gotten the message louder and clearer. The IEA mainstream scenario takes the world beyond 2.7ºC of warming. 🔥

It is not the first time that the EIA has come under criticism for underestimating the potential role of renewable energy technologies in its forecasts. To be fair, I am not sure the famed Pythia of Delphi could get the detailed statistical projections right either (though she could have foreseen climate change disasters and the central role of renewable energies). I can understand the clash of culture between PRI asset managers used to quickly reacting to market changes and EIA government officials used to the more slovenly pace of oil supertankers.

A personal anecdote

About ten years ago, I got tired of sleeping in the jungle and job hopping climate change assignments from country to country. I had a near miss with the IEA: I applied for a job in Paris, where the agency is based. The first thing I noticed is how beautiful the receptionists were (they were selected female of the species, no male though). The interviews went rather well, and everybody was pleasant through and through. The job was insanely well paid with benefits galore and a cafeteria that beats anything you can get in the village. I got on well with my potential boss and in the end he confided, “You know, we have a climate change department here, but the organization doesn’t really believe in the issue.” Wa wa wee wa. I need to get a job interview with the PRI now for the sake of objectivity.

When I first started working on climate change projects, we all thought that global warming was coming at a stately pace. The world’s scientists agreed that we had fifty years or even a century to do something. But we’re not in the 1990s, today, climate change is everywhere we look. It’s time for more enlightened alternatives to fossilized thinking.

It’s nice to know that some of our pension funds are taking a better look at their investments into climate change irresponsible companies. There’s always something you can do for our planet right now, just be the change yourself.