College calls for banks to develop products which don't back fossil fuel expansion
Jesus College has joined forces with 60 leading institutions and trusts in UK Higher Education, on a new effort to create a market for cash products that do not contribute to the financing of fossil fuel expansion.
In particular, the institutions are keen to avoid financing companies that are constructing new coal and gas-fired power plants, which can lock in decades of fossil fuel demand and emissions.
The institutions, including the Universities of Cambridge, Oxford, Edinburgh, Leeds, Bristol and University College London, which collectively manage more than £5bn across cash deposits and money market funds holdings, have issued a Request for Proposals (RfP) to banks and asset managers, asking them to create new environmentally-friendly cash products.
The College played an important role in bringing the scheme to fruition. The idea initially came from the Bursar of Jesus College, Dr Richard Anthony, and was subsequently taken up and developed by College Postdoctoral Associate, Dr Ellen Quigley, and IF Senior Research Associate, Dr Belinda Bell.
Responsible Investment is a mainstream part of equities investing, but it is still not widespread in the debt markets even though a large majority of the new capital for companies constructing new fossil fuel power stations or exploring for new reserves comes from debt.
For this reason, the institutions behind the RfP have focused on banks and the bond market as the primary sources of external financing for fossil fuel expansion. Fossil fuels are responsible for around three-quarters of greenhouse gas (GHG) emissions globally.
The RfP criteria are based on the International Energy Agency’s (IEA) Net Zero Emissions scenario and are in line with emissions reductions laid out in the Intergovernmental Panel on Climate Change (IPCC)’s Sixth Assessment Report.
The RfP is also an effort by institutions to direct funding towards the much-needed construction of renewables to accelerate the rapid energy transition away from fossil fuels, and particularly in areas where finance is a key constraint for growth, such as in low-income countries.
Dr Richard Anthony said: "We must all work together as we face the real and immediate challenge of climate change.
"Responsible investment has been commonplace in equity markets for some time, but a problem still exists with companies raising financing in debt markets.
"As a College, we have made a commitment to the environment and to investing responsibly and this will broaden the range of options available to institutions like ourselves while supporting the energy transition away from fossil fuels.”
Jesus College has been awarded a research grant to develop a fossil-free bond index. The work involves the design and development of a methodology for assessing corporate alignment with a precautionary 1.5°C scenario as well as an affiliated bond index product.
In 2022, the College won a Green Gown Award, for its work in partnership with the University of Cambridge and Trinity College, for effective engagement with the banking sector on climate finance.
The institutions participating in the RfP are:
Bath Spa University; Brasenose College, Oxford; Cambridge University Press and Assessment; Christ's College, Cambridge; Churchill College, Cambridge; Clare College, Cambridge; Clare Hall College, Cambridge; Corpus Christi College, Cambridge; Corpus Christi College, Oxford; Darwin College, Cambridge; Downing College, Cambridge; Emmanuel College, Cambridge; Fitzwilliam College, Cambridge; Girton College, Cambridge; Gonville and Caius College, Cambridge; Hughes Hall, Cambridge; Jesus College, Cambridge; JISC; King's College, Cambridge; Lucy Cavendish College, Cambridge; Magdalene College, Cambridge; Merton College, Oxford; Newnham College, Cambridge; Oxford Brookes University; Pembroke College, Cambridge; Peterhouse, Cambridge; Queens' College, Cambridge; Robinson College, Cambridge; Selwyn College, Cambridge; Sidney Sussex College, Cambridge; St Antony's College, Oxford; St Catharine's College, Cambridge; St Edmund Hall, Oxford; St Edmund’s College, Cambridge; St John’s College, Cambridge; The Gates Cambridge Trust; The Isaac Newton Trust, Cambridge; The Queen's College, Oxford; Trinity College, Cambridge; University College London (UCL); University of Bristol; University of Dundee; University of Edinburgh; University of Leeds; University of Manchester; University of Oxford; University of Reading; University of St Andrews; University of Sussex; University of the Arts London; University of Westminster; Wolfson College, Cambridge; Worcester College, Oxford.
