Responsible finance: Trump’s Kodak moment



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“They want no oil and gas,” US president Trump said of the Democrats on the opening night of the Republican National Convention, sandwiched between: “They want no guns”, and “They want no God”. On closing night he elaborated: “[Democratic nominee for President, Joe] Biden has promised to abolish the production of American oil, coal, shale and natural gas, laying waste to the economies of Pennsylvania, Ohio, Texas, North Dakota, Oklahoma, Colorado and New Mexico – destroying those states, absolutely destroying those states, and others. Millions of jobs will be lost, and energy prices will soar.”

Watching his insistence on oil and gas, I was reminded of Kodak. In 2001, Kodak bought digital photography website, Ofoto (rebranded to Kodak Gallery). By 2008 Kodak had 60 million customers, yet by 2012 it was bankrupt. Why? Because the firm made 80% margins on film, and a new business model with a different ramping rate and nowhere near that profitability initially just couldn’t convince the senior executives to make the shift, so digital remained considered a side business. 

When I spoke to Ofoto founder Lisa Gransky years ago, she said: “Those running the company thought the shift to digital would be slower, emerging markets would grow with film and that they had time to ramp down the film side of the business while the digital took over – but the shift happened almost overnight. One day film was there, the next it wasn’t, and Kodak was too late.” 

Oil and gas is Trump’s Kodak moment. 

The coal industry, certainly in the US, has been in steady decline for many years. According to the Bureau of Labor Statistics, there were close to 90,000 coal mining jobs in the US in 2012, compared with 46,600 today, and despite his 2016 campaign promises, Trump has not increased those jobs. He can’t. The transition to a low-carbon economy is well under way, driven chiefly by demand and the free markets that America holds dear.

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New direction

This year renewables are expected to generate more electricity than coal in the US, for example. Oil and gas is following. Covid-19 and a price war has exacerbated stranded asset risk and smarter firms are speeding up transition plans. In June, for example, BP slashed up to $17.5 billion off the value of its assets after lowering its longer-term price assumptions, then in August announced it would no longer do any exploration in new countries.

But people will lose their jobs if they don’t retrain – just as they did in cities like Youngstown, Ohio and Pittsburgh, Pennsylvania when the steel industries collapsed. Trump could so easily be moving with the direction of travel rather than against it, fighting for fossil fuel workers to be reskilled rather than fighting for them to keep dead-end jobs. 

For example, Hillary Clinton’s 2016 presidential campaign promised a $30 billion transition proposal to support affected workers, and Biden too has said he will invest in impacted communities. Clean energy creates jobs. According to latest data from the International Renewable Energy Agency (IRENA), in 2018 energy efficiency employed more than three million people in the US.

Trump could so easily be moving with the direction of travel rather than against it, fighting for fossil fuel workers to be reskilled rather than fighting for them to keep dead-end jobs 

States get it. Some have begun their own journey to transition and to support displaced workers. Colorado (one of Trump’s so-called “devastated” states) brought unions and environmental activists together to create an Office of Just Transition to support coal-dependent communities in the transition to 100% renewable energy by 2040. New Mexico and Virginia are following.

So, too, have financial institutions and philanthropists. Non-profit the Just Transition Fund, for example, provides grants and technical assistance for coal community transition, while other small initiatives are showing their support – such as the Impact Experience, which has brought together high net-worth investors with a West Virginia coal community. HSBC in the US is also providing monetary as well as mentoring support to social entrepreneurs such as Coalfield Development, who are creating green job opportunities in US coal mining communities.

And while, in August, the Trump administration announced that it would open up 1.5 million acres of the Arctic National Wildlife Refuge to oil and gas drilling, JPMorgan, Morgan Stanley, Goldman Sachs, Wells Fargo and Citi (among countless other non-US banks) have all ruled out financing new Arctic drilling.

Path to transition

US banks have arguably been forging their own path towards transition rather than following the current administration’s, yet it does feel that this year those efforts have increased. Until this year, other than Citi’s engagement in the Principles for Responsible Banking, the US banks had been noticeably absent from global net zero ambitions and coalitions. European banks had been battling it out alone.

In July, however, Morgan Stanley, Bank of America and Citi announced their sign-up to PCAF, the Partnership for Carbon Accounting Financials that was started by Dutch banks back in 2015. Also in July, the Rocky Mountain Institute launched its Center for Climate Aligned Finance with the financial backing of Goldman Sachs, Wells Fargo, JPMorgan, Bank of America and Amalgamated Bank. Its role is to drive decarbonization across sectors, taking its inspiration from the Poseidon Principles on shipping.

While the rest of the world and the US has moved on to digital film, Trump and the fossil fuel executives remain in the darkroom.



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