Reputation Can Cost Fossil Fuels Over $2Bn - A Signal From Mozambique LNG
Fossil fuel projects face a new risk in Africa based on precedent set by the UK and Netherlands: Withdrawal of financing because of reputational damage.
Precedent
The UK’s and Netherlands’ withdrawal of over $2Bn from a Total-led LNG project in Mozambique sets a precedence that countries / financiers could withdraw or withhold up to billions from a project that violates their public image of decency.
The convergence of these two factors might lead to more financiers following the precedent:
The extractive nature of fossil fuel projects has heightened public scrutiny and legal action.
At the same time, countries and financiers are actively protecting their reputational and geopolitical stances.
What this would mean for investors
Higher cost of capital: Reputational risk is likely to raise a project’s risk premiums.
Project delays: Withdrawals / protracted financing processes will cause project delays.
Possible project halts: Significant capital withdrawal could risk projects.
Signs of impending risk
Once scrutiny begins, investigations and bad PR kick in.
Communities how have greater access to litigation - which is increasingly becoming constitutional and structural (as stated in our signal here)
Which is increasingly getting out of investors / financiers’ / project owners’ control