Access and allocation: the role of large shareholders and investors in leaving fossil fuels underground

Abstract

AbstractAn under-researched story is how large shareholders (e.g. Pension Funds) and investors (e.g. Export Credit Agencies) whose investments in fossil fuels may amount to trillions of dollars are implementing the Paris Agreement on Climate Change and in particular leaving fossil fuels underground (LFFU). Hence, this paper addresses the question: What arguments are used by shareholders and investors in making their financial flows consistent with LFFU, and what do these arguments imply for: access to fulfilling needs; allocation of related resources, responsibilities and risks; and, the right to (sustainable) development? This paper identifies the different arguments used and clusters them into five investor/shareholder scenarios. It assesses these scenarios using the inclusive (access and allocation) development framework. We find that there is prima facie evidence that fossil fuels and associated infrastructure are doomed to become obsolete and hence stranded, which poses a series of risks for (potential) investors and various stakeholders. Three of the five identified scenarios indicate that Pension Funds and Export Credit Agencies may transfer their risks associated with fossil fuel resources, assets and/or related knowledge to developing countries justified by the latter’s Right to Development. Such transfers have negative access and allocation impacts—creating, inter alia, a fossil fuel infrastructure and path dependency in the South and amounting to a de facto transfer of a carbon budget along with carbon dependency and related debt to the Global South.