Financing fossil fuel expansion in a climate crisis
Banks globally have financed fossil fuel industries with $3.8 trillion since the Paris Agreement was adopted in 2016.
The Banking on Climate Chaos 2021 report investigates the world’s 60 largest private sector banks and is published annually by Rainforest Action Network, BankTrack, Indigenous Environmental Network, Sierra Club, Oil Change International, and Reclaim Finance.
In 2020 the report stated: “The private banking sector as a whole continues to take a position of extreme irresponsibility in the face of the climate crisis.”
Unfortunately things have not improved in the last year.
What does the 2021 report cover? The report looks at 60 private-sector banks and their lending and underwriting of debt and equity issuances to major fossil fuel companies since 2016. It examines:
- Financing for the most damaging fossil fuels – coal, tar sands, Arctic oil and gas, offshore oil and gas, fracked oil and gas, and liquified natural gas (LNG).
- Financing for the top 100 companies involved in fossil fuel expansion, through new extraction or infrastructure.
- Companies’ policies across these areas, scoring them out of 200.
Banks backsliding: increasing finance in fossil fuels
In 2020 there was a reduction in usage of oil, coal and gas of 8%, 7%, and 3% respectively. As a result of this decline in fossil fuel use, global carbon dioxide emissions are estimated to have dropped by 7% in 2020. Overall, the financing of fossil fuels fell by 9% in 2020.
However, the report acknowledges that this was less to do with ethical decisions or taking action on the climate emergency and more likely due to the fall in demand and consumption of energy because of Covid-19. For example, local, national and global transport decreased substantially due to lockdown restrictions.
'Bright spots': A fall in coal mining
The 2020 report found that “the only somewhat bright spots in terms of declining finance are in coal mining and power”. Finance for the top 30 coal mining companies had declined by 6% between 2016 and 2019, and finance to the top 30 coal power companies shrank by 13%.
However, it also said that while coal finance was slowly shrinking, the trend was being more than compensated for by growth in finance for the oil and gas industry. NatWest Group was identified as one bank making progress.
It was said to have slashed its fossil fuel financing in 2019 and significantly strengthened its policies in February 2020.