What Is 'Phase Down Finance' And Why It's Better Than Divestment To Achieve Decarbonization
Divestment from emitting assets doesn't necessarily lead to their closure, leaving a gap in low carbon investment strategies.
Though divestment has been an important pressure in the financial system, there is little evidence that it directly results in the shuttering of emitting assets. More likely, the assets will be bought by investors with different climate obligations. There are additional reasons why divestment may not be the solution.
But if divestment isn’t the solution, what should investors do? a growing number of voices calling for investors to remain invested, but only on conditions of responsible and Paris-aligned phase-down of emitting assets. We term this “Phase Down Finance”, and situate it, as per the figure below, against the broader financial needs of the global low-carbon transition that include divestment, green finance and socio-economic support for communities and economies in transition.