“Your savings finance coal and oil extraction projects or deforestation projects,” warns François Gemenne

Every Saturday we decipher climate issues with François Gemenne, professor at HEC, president of the Scientific Council of the Foundation for Nature and Man and member of the IPCC.

François Gemenne is interested in French savings. The problem, according to him, “Our economy remains largely anchored in fossil fuels, so your savings also finance coal, oil or gas extraction projects, or deforestation projects”. Based on the observation that the amounts of private savings in France are estimated “between 4 000 and 6 000 billion euros“, he suggests instead investing this money in the energy transition.

François Gemenne : I am sure that you are already doing plenty of things to reduce your carbon footprint: public transport, short circuits, food, reuse, etc. But you may not have thought about your money. When in fact, as long as you have a little savings, this is certainly where a good part of your carbon footprint is found.

The goal of savings, from a macroeconomic point of view, is to finance the economy, in exchange for remuneration for the saver. The problem is that our economy remains largely anchored in fossil fuels, so your savings also finance coal, oil or gas extraction projects, or deforestation projects.

“I’m willing to bet that most savers have no idea what their money is financing.”

François Gemenne

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And if they knew it, I even think that quite a few of them would not agree that their money was used for that.

franceinfo: What can we do?

You can obviously change banks, and there are sustainable banks appearing on the market, but it is not always easy. And then, traditional banks are also evolving. For example, at the end of last year, Crédit Agricole announced its intention to no longer finance new fossil fuel extraction projects, following COP28. But these projects will find funding elsewhere. We can assume that this is one of the reasons why TotalEnergies announces its intention to have its main listing on the New York Stock Exchange, because European shareholders want to sell their shares and are not buying any more.

But today I would especially like to talk to you about what your money could finance, not just what it might not finance. Because we are going to need a lot of money to finance the transition and we can clearly see that the governments’ pockets are empty, and that we are already starting to cut budgets, when we should increase them tenfold. . However, private savings in France represent a lot of money. The amounts are estimated between 4,000 and 6,000 billion euros.

“Life insurance alone, which is the French’s favorite savings product, is 1,800 billion euros.”

François Gemenne

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In comparison, France’s annual GDP is around 2,600 billion euros.

It’s gigantic! Imagine if a fraction of this money was invested in the transition, it would make great things happen. So, how to do it? First there are the funds which bear the ISR label, for “Socially Responsible Investment”, and which are offered by all the banks. The problem is that until the end of 2023, we found a bit of nonsense, including a lot of greenwashing, behind this label. The Ministry of the Economy brought some order to all this at the beginning of this year, but SRI funds remain little known and little liked. The French are often wary of it, are poorly informed, think that they bring in less than others, etc.

“The first priority is to better inform and be more transparent with savers – all banks should take this route.”

François Gemenne

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But there are also things the government can do.

For example ?

I will give you two examples. In the past, many public utility projects were financed by public subscriptions: monuments or train lines, in particular. We could imagine that local projects for the transition, in terms of energy, transport, housing, could be financed again by this means, for example via the issuance of bonds. But for that, the departments and large cities would need to be able to have access to the bond market. For the moment, only the regions have access to it, and they do not make much use of this means.

“Another idea would be to modulate inheritance taxes.”

François Gemenne

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The boomer generation will pass on a huge amount of real estate to their children and grandchildren: houses, apartments, studios, etc. Could we not imagine reducing inheritance taxes if boomers carry out an energy renovation of their well before transmitting it? I’m sure we could find the billions needed to renovate housing like that. And it would be a good way to carbon offset past emissions, too.