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S&P podcast: Climate concerns driving some major investors from fossil fuels

This month, S&P Global Market Intelligence's Energy Evolution dives into the growing trend of bankers, insurers and other players in the financial industry that are ditching fossil fuels to help stave off the worst impacts of climate change.

The already-growing divestment movement has gained more momentum in 2020. In January, BlackRock Inc., the world's largest asset manager, announced it would be divesting from certain coal companies. In February, the Royal Bank of Scotland Group PLC said it would be moving away from financing activities in the coal, oil and gas sectors if those companies do not have credible transition plans in line with the Paris Agreement on climate change in place by the end of 2021.

"We're entering a new era of finance," BlackRock CEO Larry Fink said on the asset manager's recent earnings call. "The investment risks presented by climate change are set to drive a significant reallocation of capital, and companies, investors and governments will all need to be more prepared."

Energy Evolution analyzes these developments and more in an episode aimed at getting listeners up to speed on what is becoming an emerging credit issue for coal companies and the rest of the fossil fuel sector. Experts and representatives from the Sierra Club, Moody's, Ceres and Peabody Energy Corp. are featured.

"I think we shouldn't discount the fact that divestments hurt the company's reputation, and reputational risk is real, and it's something that companies care a lot about," the Sierra Club's Ben Cushing told Energy Evolution. "That sort of reputational risk, combined with real financial pressures, can have a meaningful impact on the development of fossil fuels."

The official stance of Peabody, one of the largest coal miners in the world, is that climate change is occurring and humans contribute to the problem. However, the company insists the solution to the problem lies in the development of technology such as carbon capture and storage, particularly as a means for deploying coal power generation to developing countries.

"Divestment won't stop the demand for fossil fuels and the demand for coal around the world," Peabody spokesperson Vic Svec said. "What it will do is displace responsible producers with those that no one would have any say-so over any of their active governance and so on. So we don't think that's the best approach."

The podcast episode also examines the idea that the oil and gas sectors are beginning to find themselves in the same crosshairs of divestment as the coal industry. While oil and gas may have more time to react to growing climate concerns than the coal sector, how the sector responds now could have major implications for its financial fortunes.

Click here to listen to episodes of Energy Evolution. Now also available on iTunes and Spotify.