Scale down investment harmful to climate and nature

Fossil fuels are the dirtiest and most polluting sources of energy and contribute a majority of the GHG emissions that drive climate change. To reach net-zero emissions around mid-century, national governments and development finance institutions need to stop financing fossil fuels. 

The International Energy Agency’s (IEA) Net Zero scenario outlines an energy transition that would meet global demand for energy, equitable energy access for developing countries, and climate objectives to eliminate carbon emissions by 2050. In order to reach net-zero, no new coal power generation, oil or gas supply should be developed. Simultaneously, demand for fossil fuels needs to fall drastically. 

Unabated coal plants (those without technologies such as carbon capture to reduce emissions) in advanced economies need to be phased out in advanced economies by 2030 and globally by 2040, and oil and gas power generation needs to fall to very low levels by 2040.

Countries and development finance institutions, including multilateral and national development banks, have made commitments to phase out coal and fossil fuel investment to varying degrees. G20 countries made a commitment in 2021 to stop financing coal-fired power plants overseas.

Multilateral development banks (MDBs), are international financial institutions like the regional development banks or World Bank, provide financing to assist economic development. With significant pools of capital and ties with national governments, they have the ability to support a just transition to a sustainable global economy. Most MDBs have continued to fund fossil fuel infrastructure in client countries, which could deepen dependence on fossil fuels and delay the transition to renewable energy. 

As of April 2022, 82 countries have energy systems that do not include coal, 18 additional countries have committed to phasing out coal by 2030, eight have promised to do so by 2040, and nine during the 2040s. Five MDBs have made commitments to not provide any more direct coal funding.

For decades, major fossil fuel companies have leveraged their political influence through campaign donations, lobbying associations and close relationships with policymakers. This has undermined efforts to decarbonize the economy and stall climate policy. By channeling millions of dollars toward political candidates in countries like the U.S., where this is allowed, companies expect decision-makers to create favorable fossil fuel policies and vote in favor of their interests.

According to Open Secrets, the oil and gas industry contributed $219 million to the U.S. presidential and congressional election cycle in 2024, a 47% increase from the previous general election in 2020. The coal mining industry contributed about $9.7 million in 2024, 11% more than in 2020.

A 2020 Proceedings of the National Academy of Sciences study found a positive relationship between members of the U.S. Congress voting against environmental policies and the campaign funding received from fossil fuel companies. As long as the fossil fuel industry continues to make major contributions to election campaigns, the transition away from fossil fuels will face significant political obstacles. Data on countries in addition to the U.S. will be added when available.

Deforestation is harmful to ecosystems, biodiversity and local indigenous communities that rely on forests for their livelihoods. Moreover, it releases carbon dioxide (CO2) into the atmosphere. Ending deforestation is one of the most effective ways to reduce greenhouse gas (GHG) emissions.

Corporations play a critical role in reducing and stopping deforestation related to their operations, supply chains and financing decisions. Establishing corporate deforestation commitments (such as zero-gross conversion, zero deforestation or deforestation-free) is an essential first step that corporations can take to build deforestation-free supply chains. After commitments are made, corporations need to take real action and report on progress transparently.

As part of reducing forest loss, deforestation commitments can result in more private sector investments toward biodiversity protection and nature-based solutions. While commitments alone do not guarantee action, they lay the groundwork for successful implementation.

Forest 500 tracks the 350 corporations and 150 financial institutions that are most influential in causing tropical deforestation. Out of the 500 firms, about 22% have company-wide deforestation commitments in place as of 2022, up from 20% in 2021. Progress on implementation is tracked in the indicator corporations implementing on commitments to reduce deforestation.