Here in Northern California, the smoke is everywhere. It creeps into our garages, under our doorways, through our vents. It dims the sun. It is a constant reminder, for those of us not yet under evacuation, to stay vigilant: we monitor wind and fire maps hourly, we text with our loved ones and colleagues, trying to keep track of who is evacuating, and where they might go. There are so many fires burning—to the north, to the south, to the east—that when we venture outside, we wear two masks: one to protect others from the pandemic, and one to protect ourselves from the smoke. We look for places to retreat to, but there's literally nowhere nearby to go.
And all of this is happening two full months before the official start of fire season.
As directors of California-based climate activist organizations, we understand the science behind what are now called 'giga-fires', and the role that climate change plays in producing these monstrous fire complexes. We understand that today's horror show will look like the 'good old days' if we don't act now, with urgency, to address the climate crisis. And we know that, as Bill McKibben has written, "money is the oxygen on which the climate crisis burns."
Since 2008, there has been a long list of reasons to hold the finance sector to account. This fire season, we'd like to point out that the same industry that brought us the housing crisis is also directly fueling the climate crisis: they have provided over $700 billion in financing to the fossil fuel industry just since the Paris Accord was signed. Not satisfied to simply fund massive increases in heat-trapping gasses, financial entities have also invested $44 billion in activities that are decimating forests, especially the most diverse and effective carbon sinks on the planet.
"There has been a long list of reasons to hold the finance sector to account. This fire season, we'd like to point out that the same industry that brought us the housing crisis is also directly fueling the climate crisis."
Banks in particular are some of the largest investors in climate destruction. While some banks have begun to make moves—saying no to financing Arctic Drilling and new coal-fired power plants—they're still financing fossil fuel extraction nearly everywhere, including here in California. When you swipe your Chase credit card, you're supporting a bank that's funding the climate crisis.
It's particularly alarming, and frankly head-scratching, to note that the fracking industry (which also threatens the health of California communities, particularly communities of color), has not produced positive returns in over a decade. Aggressive oil and gas fracking has resulted in a glut, which, combined with expensive production techniques, makes profitability look like a pipe dream. It appears that the only profit in fracking is from debt servicing, which—and this helps explain the head-scratching bit—accrues to the banks.
Investors, however, are taking a hit. It turns out that climate destruction isn't just a terrible long-term investment—in many cases it's a terrible short-term investment too. Exchange Traded Funds, or ETFs, are collections of stocks assembled to represent a market sector, and can be traded like any other stock. A quick review of two of the biggest gas and oil ETFs (Tickers XOP and IED) reflect fossil fuel sector losses every year for more than ten years: one averaging losses of ten percent a year, and the other shedding an average of two percent per year. Even before the devastating hit to demand caused by the pandemic, oil and gas stocks have significantly lagged the overall market.
Fracking and drilling operations would discontinue immediately without the lifeblood of money. A responsible fiduciary response requires long-term investors (particularly those who claim to 'care about the climate') to exit this sector with all due speed—including not just the failing coal industry but the broader fossil fuel sector as a whole. Climate finance activists have made some progress—the University of California, the City of New York, and other major investors have finally begun taking action to divest—but too many institutions are still dragging their feet. Our own California pension funds, CalPERS and CalSTRS, continue to finance fossil fuels—even as the sector loses them money and their pandemic-emptied offices remain shrouded in wildfire smoke.
"It seems inconceivable that insurers and reinsurers have not done the math showing that their industry stands to be wiped out in the face of the coming onslaught of intensified storms, heatwaves, droughts, floods, and giga-fires. On our current path, we're headed for a world that's not just uninsurable, but also uninhabitable."
Part of the challenge is that major asset managers like BlackRock, Vanguard, and State Street have been slow to change. BlackRock has talked a big game about getting out of fossil fuels, but they're still the world's largest investor in this dying sector. If BlackRock really wants to be a climate leader, they should follow the lead of Norwegian asset manager Storebrand, which just divested from fossil fuel companies that lobby against meaningful climate policy.
Here in California, perhaps the most egregious example is the insurance industry. While many European insurers are ditching fossil fuels, US companies like Liberty Mutual and AIG continue to provide the insurance coverage needed for coal, oil, and gas installations to operate. They also invest billions of consumer premiums in these companies every year. While they support the very industries fueling the climate crisis, they're abandoning consumers affected by it. Insurers attempted to ditch policy holders after the 2019 fires, and the CA legislature had to step in to block them from that. We'll be surprised if our legislators don't need to do so again. On our current path, we're headed for a world that's uninsurable.
It seems inconceivable that insurers and reinsurers have not done the math showing that their industry stands to be wiped out in the face of the coming onslaught of intensified storms, heatwaves, droughts, floods, and giga-fires. On our current path, we're headed for a world that's not just uninsurable, but also uninhabitable. As the smoke continues to blanket our state, we call on insurers and other institutional investors to be a powerful force for good, and to end the madness of continued extraction. Our ability to thrive on this, our only planet, demands it of them.