Impacts of Investments in the Energy Transition

Daniela Vernaza

11 min Read Time | March 22nd 2023

Key Takeaways

The topic addresses the impact financial institutions have in financing or not the renewable energy transition.

Analyses must contain robust investment information on both renewable energy and fossil fuel financing.

Yearly investments should be over $1 Bn USD or $500 Mn in direct coal investments. If there is only information on coal, please include a qualitative analysis on the fact this is partial data.

Executive Summary

Due to their central function in the economy and society, financial institutions play a key role in funding a more sustainable planet, especially in financing the energy transition.

The topic addresses a company’s direct funding to the energy sector and how it is contributing or not to a clean energy transition. It should analyse the company’s investments in fossil fuels and clean energy. The note should be comprehensive enough and include loans, underwriting, and bonds. Indirect investments in the form of shares and bondholding should also be included if the company has an investment arm.


SDG choice

✅ SDG 7

Category: Products

ILG: Climate Stability

Key Definitions and Thresholds

Renewable Energy Investments
These investments are directed towards the creation of renewable energy power. They can be made through Green Bonds and regular bonds. The World Bank issued the first bonds of this kind in 2009. Theyenable capital-raising and investment for new and existing projects with environmental benefits. The Green Bond Principles (GBP) seek to support issuers in financing environmentally sound and sustainable projects that foster a net-zero emissions economy and protect the environment.

When looking at a company's green bond issuance, ensure the values directed towards renewable energy specifically are at least $1Bn a year, as green bond proceeds can be directed towards other initiatives unrelated to building renewable energy capacity.

Fossil Fuel Investments
Investments in this sector sponsor and facilitate the expansion of oil, coal, gas, and petroleum, which are all known to have severe effects on the climate.

Direct funding

Funding the company has provided directly to other companies in the form of loans and underwriting

Indirect funding

Investments made by the company in the form of shares or bonds.

Assets Under Management

The total market value of the investments that a person or entity manages on behalf of clients. A company’s AUMs are not its Assets or its Assets Under Administration.


  • Investments in fossil fuels or renewables should be at least $1 Bn per year.

  • Please make sure to construct your analysis with all the relevant information. If the company has disclosed more information on its renewable energy investments, please make sure to have the complete picture of its fossil fuel investments. This will allow readers to gauge the impact of the company correctly.


  1. If we have partial data on direct investments in coal, and these amount to at least $500Mn a year, we would be able to accept the analysis provided it makes it crystal clear these are partial investments. Please note that this new threshold only applies to direct coal investments.

For the note to be accepted, we request a qualitative analysis that gauges the company’s cumulative fossil fuel investments given that coal investments make a small portion of a company’s total carbon investments. You can use this source to support your analysis and show coal investments are only the tip of the iceberg of the company’s total fossil fuel investments.

“Overall, the overwhelming bulk of fuel supply investment in 2020 went into fossil fuels – 84% to oil and gas and 14.5% to coal (which is a much less capital-intensive sector).”

2. If yearly direct fossil fuel investments reach $800Mn, we would also consider the note. Please note this only applies to direct investments (loans, underwriting) in fossil fuels.

Note: Investments should be expressed in either USD or EUR.

DIRECT vs. INDIRECT Investments’ requirements

1. For direct investments (loans and underwritings) include:

- The total loan portfolio of the company

- Yearly investments in fossil fuels

- Yearly investments in renewable energy

Please note that we require investments in renewable energy exclusively. Green investments and green bonds include renewable energy investments but are not solely renewable energy investments. In the note, make sure to specify the amount the company provided to renewables specifically.

- The percentage of the company’s loan portfolio invested in

  • Fossil fuels

  • Renewables

- Include an analysis of the impact the company’s financed emissions are having. Which projects is the company funding?

- Consider the Thresholds and Exceptions section above

2. For indirect investments (shareholding, bondholding) include:

- The company’s Assets Under Management

- Amount the company held in fossil fuels

- Amount the company held in renewables

CAUTION: If a financial institution has over 5% ownership in either an oil and gas production company or a renewable energy company, please make sure to mention this in the note.

- The percentage of the company’s AUMs invested in

  • Fossil fuels

  • Renewables

Compare the two percentages with the industry average (refer to the internal excel file with the global percentages invested per type of energy source here. Please cite these two sources (1 & 2) when using the information from the spreadsheet).

Is the company over-investing in renewables or fossil fuels compared to the market?

Things to bear in mind:

  • If the company is a commercial bank, we would need to have information on direct investments (loans and underwriting). Please note that the company might have a big enough asset management arm. In this case, we would also need information on their indirect investments as a secondary point. (Key example)

Also, ask yourselves the following questions:

1/ The scale of the impact

  • Is the environment deeply affected, or does the issue just marginally impact it?

  • Are the changes brought by the issue profoundly changing society or the planet?

2/ The scope of the impact

  • Is the impact local, national, or global?

  • How much CO2 is released or avoided?

3/ The irremediability of the impact

  • How long would the impact described last? Months? Years? Decades?

  • How reversible is the impact described in the impact analysis? Can it be easily stopped/extended?

Find more about evaluating the severity of the impact in Step 5: Assess severity and value.

Helpful sources

Banking on Climate Caos 2022: examines banks' and financial institutions' fossil fuel investments in the form of underwriting and loans.

BankTrack: an international organisation focused on tracking banks and their investments.

Reclaim Finance: an organisation that researches and exposes financial institutions that support the fossil fuel industry.

Coal Exit: lists companies operating along the thermal coal value chain.

Fossil Free Fund: a search platform built to help people find out if their money is being used to extract and consume fossil fuels.

NASDAQ: lists major shareholding investments of financial institutions.


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