Following the signing of the Paris Agreement by 193 states and the EU and after the COP27 climate summit in 2021, several major financial institutions came under fire for their continued support of fossil fuel companies.
As governments worldwide introduce new climate policies and put pressure on oil and gas firms to improve operations and curb their carbon emissions, international organisation and environmentalists are asking that increased pressure be put on banks to cut funding for fossil fuel projects in favour of low-emissions alternatives. But despite bold promises from many financial groups, a high level of investment is still expected to be funnelled into fossil fuel operations in 2023 and beyond.
The 2022 Rainforest Action Network (RAN) report Fossil Fuel Finance Report showed which financial institutions were still pumping money into oil, gas, and coal operations and the main trends in fossil fuel funding from 2016 to 2022. Global fossil fuel financing stood at $723 billion in 2016 and remained fairly stable over the next five years, rising to $742 billion in 2021. The financial institutions offering the largest fossil fuel investments were JPMorgan Chase, Citi Bank, Wells Fargo, Bank of America, and RBC.
Following the announcement from the International Energy Agency aiming for net-zero carbon emissions for 2050, 44 of the 60 banks discussed in the report committed to the aim of “no new oil and gas fields”. However, many of these banks continue to offer funding to oil and gas companies. According to the report, 27 of the 44 banks identified still have no meaningful corporate-level no-expansion policy for any part of the fossil fuel industry.
These financial institutions have been repeatedly and publicly condemned for their continued financing of fossil fuel projects. U.S. Congresswoman Rashida Tlaib stated, “Our planet is staring down a point of no return, and the world’s largest financial institutions are pouring gasoline on the fire.” Meanwhile, Alison Kirsch, the research and policy manager at RAN, explained: “These financial institutions are directly complicit in undermining a climate stable future for us all and must immediately end their support of any further fossil fuel infrastructure expansion.” And David Tong, the Global Industry Campaign Manager at Oil Change International, said, “the fundamental arithmetic of 1.5ºC requires oil and gas production to decline by at least 3-4% per year, starting now. But no major oil and gas company has committed to ending expansion, and banks around the world continue to pour billions into fossil fuels. That must stop now. If the banks’ responses to the climate crisis are to be taken seriously, they must commit to ending finance for fossil fuels.”
There have been some positive steps forward over the last year, with one of the world’s largest banks – HSBC – stepping away from fossil fuel investments. In 2022, HSBC, the seventh largest bank in the world, announced it would no longer be supporting oil and gas projects. Before the decision, HSBC was one of the biggest lenders to energy companies globally. The decision taken by HSBC means that no funding will be given to new oil and gas fields, although financing for existing projects will continue, as well as new funds being offered to renewable energy projects. In the U.K., both Natwest and Lloyds Bank have announced plans to reduce fossil fuel financing. The Dutch bank ING and French lender La Banque Postale have also made similar pledges. Meanwhile, Barclays has instead decided to ramp up its financing for sustainable energy startups.
Yet, at the beginning of 2023, new reports show that financing for fossil fuel operations from major financial institutions is set to continue. Following COP26, the U.K. launched the Glasgow Financial Alliance for Net Zero (GFANZ), which aims to align major investments worldwide with the target of limiting temperature increases to 1.5oC above pre-industrial levels. This led 450 groups across 45 countries with assets of at least $130 trillion to sign the GFANZ agreement. Yet, recent data, gathered by Reclaim Finance, suggests that hundreds of billions of dollars have been pumped into fossil fuel projects since GFANZ.
According to the report, at least 56 of the biggest banks in the net-zero banking alliance grouping (NZBA) have provided $270 billion to 102 fossil fuel companies for their expansion, through 134 loans and 215 underwriting arrangements – this includes HSBC. Paddy McCully, a senior analyst at Reclaim Finance, stated of the funding, “GFANZ members are acting as climate arsonists. They’ve pledged to achieve net zero but are continuing to pour hundreds of billions of dollars into fossil fuel developers. GFANZ and its member alliances will only be credible once they up their game and insist that their members help bring a rapid end to the era of coal, oil, and fossil gas expansion.”
Many of the world’s largest financial institutions have announced ambitious climate targets and signed carbon-cutting pledges since the Paris Agreement and COP26, and yet few appear to be following through with their promises. Reports from 2022 and 2023 show that many of the world’s major banks are continuing to fund new oil and gas projects, which is hindering climate aims announced by the IEA and other institutions and governments. Unless this stops, meeting these climate aims will be near impossible, as oil and gas groups are unlikely to lead the green transition themselves.
By Felicity Bradstock for Oilprice.com