Monday 14 September 2020
Hundreds of millions of pounds is being invested in fossil fuels by the UK’s overseas development bank, undermining the country’s international leadership on tackling climate change, according to a new report out today.
Research by the Catholic Agency for Overseas Development (CAFOD) exposes a major flaw in CDC Group’s new climate change strategy announced earlier this year. It reveals that more than 90% of the bank’s current direct fossil fuel investments - totalling $694.4million (£525.6 million) - would still be permitted under new fossil fuel exclusions introduced as part of the strategy. This is despite the bank’s pledge to align its portfolio with keeping global warming below 1.5°C and supporting a green recovery from COVID-19.
The research, conducted by BOND for CAFOD, estimated CDC’s energy portfolio at $1.64 billion (£1.24billion) as of 2019, invested directly and indirectly through managed funds. Half of this amount – $835 million or £632 million – was invested in fossil fuels, with slightly less – $806 million or just over £610 million – in renewables.
Fossil fuels accounted for 85% of all the electricity generated and distributed through CDC’s investments in 2019. This level of fossil fuel financing undermines the Government’s promise of ambitious action on climate change, as it prepares to host next year’s UN Climate Summit, CAFOD said.
The report also suggests that CDC’s actual support for fossil fuels is likely to be significantly higher due to a lack of full information on its investments via managed funds. CDC also invests in financial institutions such as banks that have significant exposure to fossil fuels. CAFOD is calling for greater disclosure on all CDC’s energy investments.
The research is the first comprehensive analysis of CDC’s energy investments. The bank is one of the most significant channels for UK aid accounting for more than half of the Government’s total aid investment.
The report's author, Dr Sarah Wykes, Lead Analyst on Climate Change and Energy at CAFOD, said:
“Our research reveals that the CDC’s climate change strategy is not fit for purpose. CDC has a huge exposure to fossil fuels. Nearly all its current direct investments and much of its indirect investment in fossil fuels would have got through under its new strategy. In addition, there are no plans to phase out existing fossil fuel investments.
“When it comes to investing in renewable energy to build a green recovery from COVID-19, CDC’s new climate change strategy is like the ‘emperor’s new clothes’ and this needs to be exposed. Given the importance of CDC as a channel for UK aid spending, urgent reform of its energy portfolio is needed.”
Dr Wykes added:
“The government has pledged to align public finance with delivering low-carbon, climate resilient development. For this pledge to be credible, the new Foreign, Commonwealth and Development Office (FCDO) should stop all new fossil fuel investments via CDC and phase out existing investments by the end of 2021 to coincide with the UN Climate Summit in Glasgow. CDC should not receive any further funds until this reform has been implemented.”
CAFOD’s report also shows that despite the UK signing the Paris Agreement in 2015, between 2014 and 2019:
CDC made direct commitments of $1.7 billion (£1.28 billion) to energy-related companies and projects. More than 40% ($744 million, or £563 million) of the $1.1 billion (£833 million) invested as of 2019 were for fossil fuels and a third of investments via managed funds were also going to fossil fuels. The true figures are likely to be higher given the gaps in available data.
Less than 5% of CDC's direct energy investments were in decentralised renewable energy, the least cost solution for providing most people living in poverty with basic access to electricity.
The research comes just weeks after the launch of the newly merged FCDO, which critics have said jeopardises the UK’s commitment to helping people living in low-income countries.
Notes to editors
For more information, a copy of the report or a briefing/interview with Dr Wykes call Anna Ford 07584 349426. A CAFOD press officer is available 24 hours a day on 07919 301429.
CAFOD’s report “CDC’s Energy Investments: Supporting Just, Green Development?” is available to download now.
CDC’s new climate change strategy can be found on the CDC website.
The research was commissioned by CAFOD and conducted by BOND, the UK network for organisations working in international development.
CAFOD is the official aid agency of the Catholic Church in England and Wales, and part of Caritas International. Across the world we bring hope and compassion to poor communities, standing side by side with them to end poverty and injustice. Because we work through the local Church, we can reach people and places that others can’t.