Banks, climate change and the environmental crisis

The world’s 60 biggest banks have provided $4.6 trillion in financing for fossil fuels since the 2015 Paris Agreement, according to the most recent Banking on Climate Chaos report.

Fossil fuel financing plateaued in 2021 but at levels still higher than in 2016, the first year after the Paris Agreement was adopted. The overall linear financing trend since Paris is still headed upward.

And there is a disconnect between banks’ net zero aspirations and their practices. While a growing number of banks are making green claims, the majority of high street banks continue to fuel climate catastrophe. 44 of the 60 banks in the report had committed to net zero by 2050 but were still funding companies opening new oil and gas fields, potentially locking the planet into decades of climate-warming emissions.

Luckily, ethical alternatives are providing better options for consumers. 

How are banks funding climate change?

Banks provide loans, insurance and other forms of financing to fossil fuels companies. In doing so, they prop up those extracting coal and burning oil, which pump enormous amounts of greenhouse gas into our atmosphere.

Banks can also be involved in funding specific projects, like the expansion of a coal mine or the construction of a new oil rig. Without their money, projects like these would not be able to take place.

But their climate impacts don’t stop there. Banks pretty much finance every high climate impact industry, from arms to animal farming. Companies funded by UK banks are also behind some of the worst environmental abuses, such as massive deforestation of the Amazon.

Why is fossil fuel financing a problem?

In deciding what to finance, banks shape our future. The infrastructure they fund will exist for years to come: a new oil rig, a wind farm or a coal mine will provide our power for the next 20 to 30 years. Banks therefore have the power to lock us into a fossil fuel dependent future, or turn us towards a green transition.

Fossil fuel projects, funded by these banks, are also having serious impacts today, not only by funding rising climates. The Banking on Climate Chaos report says,

“Bank funding for fossil fuels often brings dire threats to the lives and livelihoods of local communities around the world — harming Indigenous Peoples, Black and Brown communities, and poor and working-class communities first and worst.”

For example, banks including HSBC, Barclays and Santander have supported the expansion of the Cerrejón coal mine in Colombia. The project has wiped multiple Indigenous communities off the map, and those living in the area are facing serious droughts fuelled by the mine’s enormous water extraction.

Which banks are financing fossil fuels?

Unfortunately, almost all UK high street banks are financing fossil fuels. Since the Paris Agreement in 2015 – where the world first agreed to limit global warming to below 2 degrees – the most UK banks have provided billions in funding to fossil fuels.

Several big high street banks in the UK appear in the Banking on Climate Chaos report of the top 60 banks for fossil fuel financing. The report covers eight of the banking groups that appear in the our guides to ethical current accounts, savings and mortgages for example.

JP Morgan Chase is the biggest funder from 2015-2021 with a total of $382 billion. It even increased its funding of fossil fuels by $10 billion more in 2021 than in 2020.

Barclays is at number seven with $167 billion and is the biggest banker of fossil fuels in Europe.

For the full listing of all 60 banks visit the Banking on Climate Chaos report website.

For years, fossil fuel financing has been so much the norm that unless banks have a robust policy on it, they may well be financing the industry. Unfortunately, only a handful of banks have fully committed to ensure that your money won’t go to oil, gas or coil.

In fact, many banks are still funding the very worst fossil fuels. For example, Citi has provided $45.41 billion in financing to companies behind fracking, and Barclays $28.82 billion since 2015.

What's in the Banking on Climate Chaos report?

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.

The Banking on Climate Chaos 2022 report is published annually by Rainforest Action Network, BankTrack, Indigenous Environmental Network, Sierra Club, Oil Change International and Reclaim Finance.

Our climate change impact rating for banks

Ethical Consumer rates banks on a number of key climate change areas:

1. We check whether they have a robust policy not to finance fossil fuels.
2. We check whether they’re invested in any companies that we have previously criticised for their climate change record.
3. We look whether they have commitments to reduce their emissions, including all emissions from financing, in line with the Paris agreement.
4. And we check whether they have been named in relation to any dirty fossil fuel projects.

Our latest research, conducted as part of our guides to ethical bank accounts and ethical savings accounts, found that 29 of the 31 banks reviewed were rated middle or worst for their climate change reporting. Only Triodos and Metro bank scored a best rating.

The big five banks in the UK – Lloyds, Santander, NatWest, HSBC and Barclays – all lost a full mark under Climate Change.

Worst banks for climate change

Barclays has consistently been the worst bank in Europe for the financing of fossil fuels since the Paris agreement. HSBC is also high on the list of key funders.

Although not registered in Europe, Citi offers bank accounts in the UK and is the second largest fossil fuel financier globally.

JP Morgan is the world’s number one funder of fossil fuels, having provided $382 billion since the Paris agreement – almost $100 billion more than the next biggest player. JP Morgan now offers bank accounts through Chase, and it owns Nutmeg, an investment platform that appears in our Stocks and Shares ISA guide.

Have things improved since the Glasgow climate conference in 2021?

Many of the biggest players in global finance have accepted their role in addressing the climate crisis and have joined the Glasgow Financial Alliance for Net-Zero (GFANZ). GFANZ was a product of the 2021 COP26 climate change conference held in Glasgow. By joining the alliance, they have committed not just to reaching net zero by 2050, but also to the 1.5°C target, and to taking immediate action to halve emissions by 2030, now just seven years away.

But a January 2023 report (Throwing fuel on the fire) from French campaign organisation, Reclaim Finance, showed that the message on the incompatibility of net zero and fossil fuel expansion is yet to be taken on board by the big GFANZ players. According to the report they are

"continuing to pour hundreds of billions of dollars into the biggest corporations that are developing new fossil fuel projects".

Of the 161 GFANZ members, only 61 had policies excluding new coal projects. Only one member had any meaningful restriction of new oil and gas projects. Ten of the members are companies featuring in some of our finance guides and the table below shows how much they are still investing whilst allegedly "striving for net zero by 2050".

Vanguard had more than twice as much investment in new coal and new oil & gas as all the other companies on this table combined.

* no coal, oil or gas breakdown for $10,000 million of this total

The members of the biggest sector alliance, Net Zero Asset Managers (NZAM), have also not voted for all the climate resolutions at companies they invest in. ShareAction found that NZAM members supported just 63% of climate resolutions, compared to 61% backed by non-members. This throws into question whether the initiative is meaningfully ensuring members are using their voting rights to drive action on climate change or whether it is largely an exercise of greenwashing.

What needs to happen?

Reclaim Finance concludes that, if they are to be seen as credible, the alliances’ guidelines and protocols need urgently to be updated to require their members to phase out the provision of financial services for fossil fuel expansion. That would include:

• immediately dropping support for the developers of new coal projects
• withdrawing support from companies expanding oil and gas production

“Financing fossil expansion means handing to the fossil fuel industry funds that could have gone to building out renewables and batteries, developing new electric powered arc-steel furnaces, or helping to pay for a just phase-out of coal and gas power plants. In continuing to finance fossil expansion, GFANZ members are sending a message to the rest of the finance sector, to industry, and to governments, that as long as the fossil companies want to keep destroying the climate upon which we all depend, that the finance will be there to support them."

Financing environmental breakdown

With biodiversity also plummeting, climate change is not the only issue on the agenda. Unfortunately, when it comes to issues like deforestation and pollution, banks don’t have a good funding track record either. 

In the last five years, numerous civil society reports have highlighted the role of financial institutions in funding environmental breakdown and the associated human rights abuses and animal rights violations.

Below we highlight just four recent reports.

UK banks finance oil company responsible for Amazon spills

In 2024, an investigation by the Bureau of Investigative Journalism (TBIJ) found that two UK high-street banks, Santander and HSBC, helped Peru’s state oil company raise US$1bn for a project to increase its capacity to process and refine oil from the Amazon. According to NGO Amazon Watch, JPMorgan Chase (owner of Chase bank) also financed the project. 

The company, PetroPerú, owns the 1,100km Norperuano pipeline, which cuts through the Pastaza River complex, the largest wetland in the Peruvian Amazon. According to TBIJ, the pipeline has been the source of more than 53 oil leaks since 2013 and PetroPerú spent over US$80m on cleaning up spills related to it between 2017 and 2020. Much of the oil to be processed by the new project will pass through the Norperuano pipeline.

Both Santander and HSBC have policies restricting their investment in projects taking place in wetlands of international importance, such as the Pastaza River complex, but this didn’t stop them funding the project.

Frederic Hache, co-founder of the Green Finance Observatory think-tank, told TBIJ 

“Santander’s and HSBC’s business decisions, apparently contradicting their own sustainability policies, is a timely reminder that we cannot trust voluntary business initiatives and that nothing can replace environmental regulation.”

Amazonian communities fight back against pipe line leaks

The pipeline not only affects precious habitats but also the people living there.

In October 2024, PetroPerú reported that it had controlled yet another crude oil leak in the Pastaza. But according to Amazon Watch, Indigenous communities on the front lines of the spill disagreed with the official account, stating that the spill was not under control and that villages were running out of water and food due to the contamination of their rivers and crucial fishing area.

In a statement, Amazon Watch said of Petroperú, “This most recent oil spill underscores the reality that its extractive business model has always been and will continue to be antithetical to the health of the local ecosystem and frontline communities.

"The Indigenous Wampís, Achuar, and Chapra nations are campaigning to stop the flow of money to Petroperú. In April 2024, Indigenous leaders travelled to Washington D.C. to meet JP Morgan Chase to discuss the impact of the bank’s investment in Petroperú. But the bank cancelled the scheduled meeting. Olivia Bisa, President of the Autonomous Territorial Government of the Chapra Nation in the Peruvian Amazon said: “We are bitterly disappointed at JPMorgan Chase’s decision to cancel a scheduled meeting with us after we travelled from Peru to meet them. JPMorgan is funding oil spills and Indigenous rights violations in the Peruvian Amazon and I am being personally targeted for representing my community in opposing this. The bank does not even have the respect to listen to us.”

As well as switching away from the banks involved, you can support the campaign via Amazon Watch.

Banks linked to human rights abuses

Bank funding for fossil fuels often brings dire threats to the lives and livelihoods of local communities around the world, particularly Indigenous Peoples.

Communities facing those impacts continued to resist, including Australia’s #StopAdani movement, the camps opposing Enbridge’s Line 3 Pipeline in the U.S., and the growing coalition to stop the East African Crude Oil Pipeline across Uganda and Tanzania.

Below is just one example of human rights abuses lined to fossil fuel extraction.

We also have a separate article on banks and human rights abuses.

No faith in fossil fuels

In summer 2022, a total of 35 faith institutions announced their divestment from fossil fuel companies in response to the industry’s expansion plans. 19 of the 35 institutions divesting are from the UK.

The divestment announcement was organised by the World Council of Churches, Operation Noah, Laudato Si’ Movement, Green Anglicans and GreenFaith. It comes from faith institutions in Belgium, Brazil, Canada, Ireland, the UK and the US, just weeks before Anglican bishops from around the world gather for the once-a-decade Lambeth Conference in Canterbury.

A full list of the faith institutions divesting from fossil fuels is available online (opens as a Google spreadsheet).

Faith institutions now represent more than 35% of all divestment commitments globally – more than any other single sector.