Monday

4th Mar 2024

Opinion

Will EU give greenlight to finance industry to fuel climate crisis?

  • How credible are EU member states, portraying themselves as climate champions, while letting their financial industry generate profits from its deadliest investments? (Photo: Mika Baumeister)
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In a few weeks' time, the EU will decide on the content of its Corporate Sustainability Due Diligence Directive (CSDDD). The directive provides a unique opportunity to regulate the impact of EU companies beyond its borders, with a focus on human rights violations and environmental destruction; including fuelling the climate crisis.

But ongoing negotiations on the CSDDD are a clear example of the contradictions within the EU's own positioning on climate issues.

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In particular, efforts by some member states to exclude financial services from the directive mean that the policy could end up looking at only a fraction of the actual impact. European banks, investors and services are financing the expansion of fossil fuels and harmful industrial agriculture corporations that are pushing the planet to the brink.

As parties involved in CSDDD's trilogue negotiations are about to debate the financial sector coverage, as well as climate obligations for all companies covered by the directive, the European Union must walk the talk and demonstrate its commitment to protecting the future of people and the planet.

Observers of the European Green Deal and COP negotiations will note that EU leaders like to portray themselves as climate champions ­both domestically and internationally.

The EU's pathway to climate neutrality is widely-considered to be the most ambitious in the world. Regulations addressing current sources of emissions and the loss of biodiversity show vital progress.

However, most of the Green Deal legislation falls short in the face of the climate emergency within its borders, while the EU fails to financially support partner countries to respond at the pace and ambition its historical responsibility commands.

And worse still, it is continuing to fuel the climate crisis by giving free rein to EU-based banks and investors to pump billions of Euros into fossil fuels and industrial agriculture in the Global South to turn a profit.

Latest Action Aid's research compares the public funds provided by the EU as international climate finance to support partner countries in their climate transitions, with the private investment in climate harmful activities by EU-headquartered banks.

The research has found that, since the Paris Agreement, financing of EU banks to fossil fuels and industrial agriculture activities in the Global South was almost three times that of the total provided by the EU as climate finance to countries on the front lines of the climate crisis.

In the case of France, the number is staggering: three of the largest French banks provided an annual average of 28 times more financing to fossil fuels and industrial agriculture activities in the Global South than the French government in climate finance.

Similarly, according to a report soon to be released by CAN Europe and Friends of the Earth Europe, 42 European companies, including 19 financial corporations, are involved in so-called 'carbon bombs' projects globally. Carbon bombs are projects that can emit over one gigaton of CO2 over their life cycle. These projects alone have the capacity to exhaust 60 percent of the remaining global carbon budget, according to the IPCC estimated budget for a 50 percent probability of limiting global warming to 1.5°C.

In other words, not only does the EU provide insufficient finance to support partner countries in their climate transitions, but it's currently allowing European businesses to make short-term profits by locking us in a high carbon future.

Due to existing gender inequality in society, women and girls in the Global South are more affected by climate change and continue to be at the forefront of the devastating impacts brought into our world by the financing of large-scale fossil fuel and industrial agriculture projects. They are more dependent on threatened natural resources, and therefore more vulnerable to droughts, floods, and extreme weather temperatures.

Macron and Le Maire

With such stakes at play, why is there active resistance from the EU to including the financial sector within the scope of the CSDDD? The Council, following a shocking push from France's Emmanuel Macron and Bruno Le Maire, is leaning towards excluding financial services altogether.

Even the most ambitious position of the European Parliament excludes some financial services and activities from the scope of the directive, ignoring guidance from the UN and OECD on the matter. Such an exclusion would provide a blank cheque to the EU financial industry to continue fuelling the climate crisis.

The EU financial industries need to align with the Paris Agreement; and if they're funding carbon bombs while issuing voluntary commitments to greenwash their dirty business, then the EU needs to step in, regulate, and make actual transition mandatory.

On Wednesday (15 November), Council parties from EU member states convened and defined the revised Council's CSDDD position.

Unfortunately, they do so without engagement from civil society and citizens, avoiding scrutiny and accountability. And yet, one question will prevail: How credible are member states portraying themselves as climate champions while letting their financial industry generate profits from its deadliest investments? The contradictory stances jeopardise the EU's very credibility and put us all in danger of climate doom.

Countries like France need to stop using the EU to allow funding the planet's destruction, and instead need to impose the highest human rights and environmental standards on their influential financial sector.

Author bio

Jean-Pascal Van Ypersele is a former vice-chair of the IPCC, and and professor of climate and environmental sciences at the Université Catholique de Louvain (UCLouvain). Olivier de Schutter is a Belgian legal scholar and UN special rapporteur on extreme poverty and human rights. Riccardo Mastini is an environmental economist. This op-ed is also signed by the directors of Climate Action Network Europe, Friends of the Earth Europe, and Action Aid.

Disclaimer

The views expressed in this opinion piece are the author's, not those of EUobserver.

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