Just 7% of global banks’ financing for energy companies went to renewables between 2016 and 2022, according to new data published today by Sierra Club, Fair Finance International, BankTrack and Rainforest Action Network. While numerous financial institutions have committed to reach net zero emissions by 2050, this data shows shockingly low financial support for clean energy through loans and bond underwriting.
The industry-led Glasgow Financial Alliance for Net Zero (GFANZ), which is committed to financially contribute to achieving the 1.5°C target, commissioned research that shows low carbon energy investments need to account for at least 80% of energy investments compared to fossil fuels (4:1) by 2030 to reach climate goals. However, no bank looks set to even reach this minimum requirement.
Overall the 60 banks saw $2.5 trillion in loans and bond underwriting provided to the companies examined for energy activities between January 2016 and July 2022. Of that, $2.3 trillion was related to the production of fossil fuel energy and just $178 billion was related to clean energy activities such as wind and solar.
Bank loans and bond underwriting for renewables went from 7% of the overall financing of the energy companies examined in 2016 to a high of 10% in 2021, but virtually stagnated between these dates. The total amount of clean energy financing in this period remained abysmally low: $23.2 billion in 2016 and $34.5 billion in 2021.
Citi and JP Morgan Chase pumped the most into the energy companies examined between 2016 and 2022 with some $181 billion each but just 2% of this went to renewables. Similarly, only 2% of Barclays’ financing for the energy companies examined went to renewables. Renewable financing for Royal Bank of Canada is at just 1%, Mizuho 4% and HSBC 5%. The figure stands at 7% for French bank BNP Paribas.
Data calls into question net zero commitments
Surprisingly, the data reveals that GFANZ member banks on average provide less financing for renewable energy than their counterparts that are not in the alliance. This makes some of the GFANZ members’ speeches on financing the transition ring hollow at best.
When asked this week during a session at the World Economic Forum in Davos whether Citi had ever refused to fund new fossil fuel projects, CEO Jane Fraser responded: “We need to have energy security and we need to be operating on cleaner technologies and the two, as we are seeing right now, cannot be mutually exclusive.” Yet, today’s data demonstrably proves that Citi is prioritising the proliferation of fossil fuels and existing relationships over the very clean technologies that she recognises we need.
This inconsistency directly echoes the new report published last week by a dozen NGOs, including Reclaim Finance, revealing that after committing to net zero by joining GFANZ, financial institutions have continued pouring hundreds of billions of dollars into the companies developing fossil fuels. This report indicates that Citigroup, one of the founding members of the NZBA, approved 136 transactions that directly provided and facilitated US$30 billion in capital to fossil fuel developers, including Saudi Aramco, QatarEnergy, and Gazprom since joining in April 2021.
For years, climate finance groups have criticised banks over their financing of fossil fuel expansion. With the window of opportunity to avoid the worst of a climate breakdown rapidly closing, it’s now time to call on banks to massively scale up their support to sustainable energies as well.
“Given that GFANZ co-chair Mark Carney has publicly recognised the need to rapidly increase the ratio of green financing to at least 4 times that of fossil fuel financing, it is alarming that GFANZ members have in fact financed less green energy than those outside the alliance. To stop the climate crisis from further unfolding, banks must stop dragging their feet and start shifting their financing away from fossil fuels towards green energy.”
Maaike Beenes, campaign lead at BankTrack
“Many banks claim that they continue to provide financing for fossil fuel clients in order to help those clients in their climate transition. This data calls into question that claim, and gives proof that banks must get serious about financing the clean energy transition. In order to reach the goals of the Paris Agreement, we know that investments in renewable energy must dramatically increase this decade. Banks must take bigger strides to scale up their financing for renewable energy and phase out their financing for fossil fuels — and fast.”
Adele Shraiman, campaign representative with the Sierra Club’s Fossil-Free Finance campaign
“Financial institutions love to speak about their purported climate leadership, but the data speaks louder: Banks are seizing the windfall profits from fossil fuel expansion and shorting the investments we need in clean energy development. To avert climate disaster, financial institutions need to take every measure to align their financing activities with science-based targets, not wishful thinking and false solutions.”
April Merleaux, research manager at Rainforest Action Network
“Banks will continue to exacerbate the climate crisis unless regulators and governments intervene. Banks need to be forced to align their portfolios with 1.5 degrees and commit to a just energy transition that takes into account the interests of workers and affected communities.” Rémi Hermant, policy analyst at Reclaim Finance said: “Scaling up financing to clean energy and phasing out support for fossil fuels are the two sides of the climate equation. Yet, numbers once again don’t lie and banks are dramatically failing on both. With all doubts allowed on the sincerity of their net-zero pledges, it’s high time for banks to stop supporting fossil fuel expansion and commit to massive 2025 and 2030 clean financing targets.”
Kees Kodde, project lead at Fair Finance International
- The data compiled by Profundo examines lending and bond underwriting by 60 banks to 377 companies operating in the global energy sector (fossil fuels, electricity, and renewable energy) which collectively represent around 75% of the global production volumes in the past three years.
- Financing transactions were examined for the period January 1, 2016 to 31st July 2022. Data for loans and underwriting for renewables does not include nuclear, blue hydrogen, carbon offsetting or carbon capture and storage.
- Data for fossil fuels focuses on the financing of exploration, extraction, drilling and refining of coal, crude oil and natural gas as well as power generation, pipelines and oilfield services.
- The findings on individual financial institutions were shared with the banks for their comments.