The Bank of Finland announced that they aim to make their investment portfolio carbon-neutral by 2050. This same scenario seems to be happening worldwide as regulators, banks, and investors shift their support to green industries.
Earlier this month, Finland�s central bank, the Bank of Finland (BOF), announced that its investment portfolio will become carbon neutral by 2050. However, board members of the central bank have cautioned that it will only achieve this target if other countries meet their carbon targets. This is because a significant proportion of BOF�s investment portfolio consists of foreign exchange reserves in the form of bonds issued by various countries.
BOF joins many institutions that have already announced their carbon-neutral targets, indicating a global shift towards green investment and reduced financial support for industries that produce greenhouse gasses. This is in line with the Paris agreement that aims to limit the global temperature increase to below two degrees Celsius through long-term commitments to reduce pollutants and protect the environment.
According to Tuomas V�lim�ki, Member of the Bank of Finland Board, beating climate change �requires channeling cash flows to low-carbon investments,� in effect also lowering the carbon footprint of any portfolio.
Global economies set carbon-neutral goals
The Republic of Finland is slated to be one of the fastest economies to transition towards carbon neutrality, just behind Uruguay.
The country is a member of the Carbon Neutrality Coalition. To date, the coalition has over 449 cities, 22 states, 1101 businesses, and 45 investors as members. As a whole, they are committed to achieving carbon-neutrality and even net-zero emissions as soon as possible.
Most countries have set 2050 as their target date for achieving carbon-neutrality. Countries like Australia, Singapore, United Kingdom, and even the two leading carbon emitters, the US and China, have announced net-zero goals in the future. However, no concrete dates have been announced yet.
The European Union has also put forth several legislations and policies to reduce greenhouse gas emissions by at least 55% by 2030. The EU aims to make Europe the first carbon-neutral continent globally and a climate-resilient society by 2050. On top of this, the EU is also committed to helping developing nations transition towards a green economy through climate financial support.
Financing a green economy
Commercial banks and investors worldwide have also started to veer away from investing in the oil and coal industries in favor of clean and renewable energy. The increased reluctance of financial backers to finance oil and coal will severely limit the industries� growth in the coming years. As a result, most oil and coal companies have started to diversify their balance sheets and intensified research for cleaner operations.
Investors and philanthropists like Bill Gates, Jeff Bezos, and Elon Musk are also actively supporting greener industries and even launching initiatives of their own. For example, earlier this year, the global price of bitcoin plunged due to Elon Musk�s outcry that the cryptocurrency is using too much energy.
The global support for clean and green industries is expected to make renewable energies cheaper and more efficient in the future. However, while coal, oil, and other polluting industries like mining remain one of the biggest industries in the world, the increased regulations, reluctance of backers, and growth of clean alternatives will no doubt take the industry to a decline.