Global Investors Shift Focus from Fossil Fuel to Renewable Energy

BY HUSSEIN ADELEYE

As the climate crisis continues to bite harder, its impact is starkly felt across communities, ecosystems, and economies. Central to this crisis is our persistent dependence on fossil fuels which not only drives up carbon emissions, accelerating global warming, but also inflicts severe environmental harm in vulnerable regions where extraction is concentrated.

For years, scientists, environmental activists, and impacted communities have called for divestment from fossil fuels in favour of clean, renewable energy. Yet, global investors have often prioritised short-term profits over long-term sustainability, continuing to fund fossil fuel projects that exacerbate the climate crisis. However, a recent shift in investor attitudes indicates a tipping point in global finance, with major players beginning to reassess their involvement in fossil fuels.

Recent findings from a Climate Opinion Research Exchange (CORE) and FT Longitude survey reveal that 81% of institutional investors see fossil fuels as increasingly unappealing over the next five years. Additionally, 80% plan to ramp up their renewable energy investments within three years. This shift signals a seismic change in the investment landscape, where fossil fuels, once seen as safe, high-return assets, are now perceived as financially and environmentally unsustainable. Covering sectors such as insurance, asset management, banking, and pension funds across 14 countries, the survey underscores a widespread rethinking of financial priorities.

According to the survey, 76% of investors intend to reduce coal holdings within three years, and oil investments are on a steady decline, particularly in the U.S. and Europe. Many expect a full phase-out of coal by 2031 and oil by 2036, reflecting a growing belief that long-term returns are stronger in renewable sectors. This pivot underscores a crucial reassessment of fossil fuels as risky and unprofitable, in contrast to the resilience and growth potential that renewables now represent.

According to CORE, the motivation behind this divestment trend is largely twofold: reputational risk and alignment with Environmental, Social, and Governance (ESG) policies. For many investors, fossil fuel assets no longer align with long-term sustainability goals or reflect an institution’s climate responsibilities. The shift away from fossil fuels aligns with a broader movement in global finance towards ESG-focused investments, as asset managers, banks, and pension funds prioritize sectors like renewable energy that offer stable, long-term returns. Once considered niche, responsible investment is now reshaping global financial markets, and for the fossil fuel industry, this shift presents an existential challenge.

However, this divestment trend illuminates stark contrasts in global energy approaches. Developed nations in Europe and North America are increasingly stepping away from fossil fuels, with initiatives like the European Green Deal and U.S. climate pledges driving the transition. Conversely, emerging economies in Asia and Africa still view fossil fuels as central to growth and energy security, essential for industrialization and economic stability. Some investors also selectively back lower-emission projects, such as natural gas, as “transition fuels.”

For oil-dependent economies like Nigeria, the global shift away from fossil fuels presents both significant challenges and potential opportunities. As Africa’s largest oil producer, Nigeria has long relied on oil revenue, but this dependency has also left its economy exposed to volatile global oil prices. Unfortunately, many oil-producing countries have not fully leveraged past oil booms for sustainable development, and high poverty levels remain prevalent.

With declining international interest in fossil fuels, Nigeria now faces a critical choice: it could attempt to fill the gap left by divesting investors, attracting foreign companies that might benefit from more relaxed regulations, or it could prioritize economic diversification to build a more resilient and stable economy. However, the latter path will require robust support from the Global North, multinational corporations, and investors especially those who have historically driven emissions.

This reality is mirrored across oil-reliant nations in the Global South, where economies risk becoming mired in stranded assets and stagnant growth if they cling to fossil fuels. To avoid a future of environmental degradation and economic fragility, these nations must urgently explore paths toward building sustainable, diversified economies less dependent on fossil fuels. Global cooperation and financial support for sustainable energy transitions are essential in ensuring that the burden of climate action does not fall disproportionately on countries least responsible for carbon emissions.

Beyond divestment, investors bear responsibility for the environmental degradation left in the wake of fossil fuel extraction they finance through Multilateral corporations like SHELL, Eni, Total and others. As these multilateral corporations also begin to move away from high-risk onshore projects in places like Nigeria’s Niger Delta, they must also confront the lasting social and environmental impacts of their past activities. Simply withdrawing investments is insufficient; these companies and their backers must actively contribute to restoration efforts, recognizing the principles of environmental justice for the communities disproportionately affected by extractive practices. Global investors and corporations must go beyond financial withdrawal to actively engage in the rehabilitation of impacted areas as a matter of justice for communities who have endured these hardships despite contributing minimally to global emissions.

For example, in the past three years, the Peoples AGM, a pan-African coalition led by ANEEJ has consistently pressed investors in multinational corporations to divest from fossil fuel projects in the Niger Delta. The movement urges investors to witness firsthand the environmental degradation their investments have brought. While institutions like the Church of England have divested on ethical grounds, others, such as Norway’s Government Pension Fund, continue to prioritize short-term returns over long-term climate responsibility despite repeated encouragement to divest.

Looking Ahead to COP29

As world leaders, investors, civil society, and environmental advocates prepare for COP29 in Baku, the conversation will increasingly centre on climate reparations for communities disproportionately affected by the climate crisis and other effects of extractive practices. Multilateral corporations like Shell, Eni, and Total, along with their investors, will be challenged to commit not only to divestment but also to address the profound social and environmental costs of their past actions. This is not merely about reallocating funds but about recognizing and alleviating the burdens that fossil fuel investments have placed on vulnerable communities.

In this evolving financial landscape, global investors have an opportunity to lead responsibly by supporting genuine climate solutions, investing in renewable energy, and contributing to the restoration of affected communities. The time has come not only to divest but to take meaningful steps toward a sustainable and equitable future.

• Hussein Adeleye is the Communication Officer of ANEEJ