Green dollars, dirty secrets: Exposing private sector investments’ role in climate change

World Social Forum 2024 Kathmandu

The 16th edition of the World Social Forum (WSF), under the theme “Another World is Possible,” concluded in Kathmandu last week. The WSF served as a platform to vocalize opposition and confront the longstanding issues of neoliberalism and hegemonic globalization, which have historically perpetuated poverty, inequality, and injustice. The forum provided a vital space for the exchange of ideas, sharing experiences, and discussing alternative practices that stand in contrast to hegemonic globalization, neoliberal capitalism, corporatization, market fundamentalism, and political authoritarianism. 

The event opened with a solidarity march where thousands of people from 98 countries came and joined together, carrying banners and placards with slogans stating to seek justice, peace, equality, and an urge to end any form of discrimination. Throughout the forum, participants engaged in meaningful discourse and collaborative efforts.

Climate crisis is political

Climate change is an urgent global challenge and took center stage at the World Social Forum. Hundreds of movement leaders, civil society organizations, activists, people living in poverty and marginalization across the globe came together to demand climate justice. Climate crisis is political; the greed of being wealthy, particularly by the global north has disproportionately affected the global south in more than one way. Every year climate induced disasters hit the poor, vulnerable, and underprivileged communities. Recently global leaders met at COP28 and agreed on transitioning away from fossil fuels, but there is no fair share of finance. As The ongoing discourse centers on the possibility of limiting the global temperature rise to 1.5°C, Global discourse on ‘Navigating the Path to Climate Justice’ highlighted the major three issues: climate justice, climate finance, and impacts of climate change in mountains and islands. Climate justice cannot be served to the poor, vulnerable, and underprivileged communities, and countries, especially in the global south, until and unless today’s extractive economic model is transformed into a regenerative one. In the WSF, a session shed light on these disparities, where the speakers and participants highlighted the urgent need for concrete climate actions. Countries in the global south cannot bear the disproportionate impacts of climate change while the global north continues to profit.

Global South demanding climate justice

At the WSF, climate activists from different parts of the world such as Australia, Bangladesh, Brazil, Denmark, Jordan, Kenya, India, Italy, Nepal, Uganda, and Vanuatu came together to deliberate on various climate justice issues. The activists representing diverse movements from island nations to mountain regions, underscored a crucial message: the climate crisis is inherently gender-biased, disproportionately affecting women compared to men. Emphasizing the need for a gender-sensitive approach, they stressed that women bear unique and heightened burdens in the face of climate change. Their united call at the WSF sought to elevate awareness and foster collaborative efforts to address the gender-specific impacts of the climate crisis, promoting a more inclusive and equitable response to global environmental challenges.

The impact of climate change in mountain areas is a sad reality. The hydrological cycle is changing, glaciers are melting at an alarming rate, and extreme events have become more frequent and severe, causing the mountain’s population to shrink. Similarly, mountains that provide freshwater to the land are slowly turning into barren rocks. Those communities in mountain regions face an uncertain future. Climate change affects multiple dimensions of well-being. Temperature rise, sea level rise, shifts in precipitation patterns, ocean acidification, and an increasing number of extreme weather events have an impact on how and where we produce our food. Our food system is broken, and vulnerable people are losing their faith and trust in it. And the discussion highlighted the interconnectedness between mountain regions and islands like Vanuatu. Glacial and snow melting have a linkage with sea level rise. No parts of the world remain untouched by the impacts of climate change, while the impacts and scale may vary. Undoubtedly climate change is the root cause but what’s exacerbating the crisis? It’s ‘flows of finance in the wrong direction’. A solution can indeed be found through the divestment of investment. 

Exposing private sector investments’ role in climate change

Fossil fuels and industrial agriculture are the two major sectors contributing to climate change.  A recent study report by ActionAid shows that the global private sector, especially banks, is investing in fossil fuels and industrial agriculture which the report claims is flowing in the wrong direction. Banks have provided an annual average of 20 times more financing to fossil fuels and industrial agriculture in the Global South than Global North governments have provided as climate finance to countries on the front lines of the climate crisis. The combined average annual bank financing for fossil fuels and industrial agriculture in the Global South between 2016 and 2022 was $513bn, while only $22.25bn was received as financial support for climate action in the Global South in 2020. Despite banks’ pledges to address climate change, the banks have financed $3.2trn for fossil fuels and $370bn for industrial agriculture in the Global South over the past seven years since the Paris Agreement in 2015.

Global climate financial infrastructure 

The global financial infrastructure under UNFCCC, mandates developed countries to provide $100bn of climate finance annually for climate action to developing countries by 2020.  However, reaching the pledged amount has proven challenging. During the discussion on climate finance in WSF, the speakers highlighted how the richest five billionaires have doubled their fortune since 2020, after Covid-19, whereas five billion people across the world have been poorer. Climate change escalates the economic gap between these two classes in the community. Countries in the global south are dealing with debt crises and employing widespread austerity measures worsen the challenge of addressing climate change.

Public financing has the potential to significantly contribute to climate change solutions. However, it remains a part of the problem when financial sectors fail to consider climate in their investment decisions. $400m a year, which developed countries should be delivering at times, but $10.5bn is going directly to fossil fuel subsidies. This shows how unjust and hoodwinked the global north has been to the global south. Money is there, but it is flowing in the wrong direction. Banks and private sectors are fueling the climate crisis in the global south, and the funding is directed more towards climate-harming businesses and industries.

Climate finance is channeled from developed to developing countries. But looking at the trend of today’s world’s economy, even the developing countries are economically stable. Maybe it’s time to look deeply into the issue and restructure financial flows not only from developed countries to developing countries but also from developing countries to developing countries. The roles of the biggest contributors to greenhouse gas emissions, like China and India, need to be recognized. And how they can contribute to the solution depending on their capacity to address the issue. However, it remains crucial to stick with the polluters’ pay principle, looking at their historical responsibility of reparation.

Way forward 

Finally, the WSF came up with the statement that to facilitate the process to transform towards the real solutions. Governments, especially from the global north, must effectively regulate the banking and financial sectors, to stop fossil fuels and industrial agriculture expansion. The statement highlighted an urgent need to scale up support and planning for just transitions to real solutions such as renewable energy and agroecology. Furthermore, redirecting harmful fossil fuel and industrial agricultural subsidies and finance is emphasized. There is an urgent need for transitions through scaled up climate finance, tax justice and debt relief.  Banks and private sectors need to work to bring emissions down to real zero and must stop financing fossil fuel, deforestation, and other harmful industrial agriculture activities, to protect the rights of communities.

Badal is Livelihood and Natural Resources Specialist and Poudel is Trainee (Climate Justice Campaign) at ActionAid International Nepal