“Drill, baby, drill”. These words, uttered numerous times by incoming US president Donald Trump while on the campaign trail, have heralded yet another global energy shift.
In November, at a campaign rally in North Carolina, Trump gave a stern warning to Robert F Kennedy Jnr, a staunch environmentalist in the Republican Party who is poised to take a prominent role in the White House, saying “you can’t touch our liquid gold. Don’t touch the oil and gas. Let me handle that.”
The US elections were always going to change the global energy trajectory, but the pace and scale may be unprecedented. US banks were listening during the campaign trail and have since made a few announcements of their own.
“Pragmatic solutions to help further low-carbon technologies.” “Advancing energy security.” These were the words proffered by JPMorgan in its statement exiting the Net-Zero Banking Alliance earlier this week. It became the sixth-largest US bank to exit after Goldman Sachs, Wells Fargo, Citi, Bank of America and Morgan Stanley, which have all exited the alliance in the past month.
The Net-Zero Banking Alliance is a bank-led, UN-convened alliance that brings together a global group of banks that have voluntarily committed to aligning their financing activities to net-zero pathways by 2050.
None of the US institutions has given reasons for their exit, but it is strongly believed that it is linked to Trump’s ascendancy to power and his disdain for the energy transition.
By virtue of being in this alliance, funding for certain technologies was excluded as banks had to critically assess the climate risks associated with their investments. The Republican Party saw this stance as counterintuitive, especially since the US has the largest gas production and export market in the world.
Despite this exodus by US banks there are still 141 banks from 44 other countries in the alliance. However, it does skew the alliance’s policies and actions to a more Eurocentric ideology. This is equally troubling given the collapse of energy security and astronomical energy prices in the EU, which have caused Germany to suspend its government of national unity and call for early elections.
Norway has also started a campaign to cut ties with the EU power grid due to soaring electricity prices. Norway’s energy minister described it as a “shit situation” when energy prices hit their highest level since 2009.
The incoming US president has on numerous occasions said climate change is a hoax and has openly declared his preference for oil and gas. This does not bode well for climate targets and investments in sustainable energy sources. SA will not be left out of the fray — we can expect defunding of some programmes and a redirection of efforts towards oil and gas.
While a focus on oil and gas is welcome, especially upstream activities, SA still has to grapple with its own decarbonisation goals, the Paris Agreement and carbon abatement trade policies. SA has its Integrated Resource Plan and energy plans tied to industrialisation and economic growth.
With a move to oil and gas assets, banks are simply aligning themselves with future profits. It should concern us when energy policy can be abandoned so quickly on the promise of oil and gas profits. This shift will have a profound global impact that will see numerous investment opportunities around the world, but it also throws the energy transition off its axis.
I expect some global banks to follow suit, especially since America’s climate commitments will come under review. I have over the years tried to highlight that there is nothing benevolent about what banks do. They exist for shareholder profit maximisation and executive bonuses. Profit over purpose will always be their North Star.
Unsurprisingly, on the day of the announcements the companies’ share prices closed in the green and have seen upward movements in the past month. A word to the wise: never use banks as your moral compass.
• Mashele, an energy economist, is a member of the board of the National Transmission Company of SA.
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