The world’s largest banks have funneled $3.8 trillion into the fossil fuel industry over the last five years, according to new figures published Wednesday.
Banks provided more financing to oil, gas and coal companies in 2020 than they did in 2016, the year countries signed the Paris climate agreement and committed to rapidly reducing emissions to keep global temperature rises below 2 degrees Celsius.
Financing was 9% lower overall in 2020 than in 2019 because the pandemic cut demand for fossil fuels. But the first half of 2020 saw the highest level of fossil fuel financing in any half-year since the Paris Agreement.
The trajectory of the finance sector is heading “definitively in the wrong direction,” warned the report, published by Rainforest Action Network, the Sierra Club, the Indigenous Environmental Network and several other nonprofits.
Now in its 12th year, the report analyzed the lending and underwriting of 60 of the world’s biggest banks using data from Bloomberg as well as other sources, including the Global Coal Exit list produced by the nonprofit Urgewald.
“The picture it paints is alarming,” said Ben Cushing, financial advocacy campaign manager at the Sierra Club. “Major banks around the world, led by U.S. banks in particular, are fueling climate chaos by dumping trillions of dollars into the fossil fuels that are causing the crisis.”
JPMorgan Chase provided $51.3 billion of fossil fuel financing in 2020, according to the report — 20% less than 2019 but enough to keep its position as the world’s biggest fossil fuel financer. The bank, which has called climate change “the critical issue of our time” and says it has “long supported the goals of the Paris Agreement,” has provided nearly $317 billion to fossil fuel companies since 2016.
Citigroup is the second-largest financer, providing a total of $237.5 billion from 2016 to 2020, according to the report.
JPMorgan Chase declined to comment on the report, and Citigroup did not respond to a request for comment.
Though U.S. banks dominate fossil fuel financing, European banks are also big. French bank BNP Paribas, which has pledged to be a leader in climate strategy, provided $40.8 billion in fossil fuel financing in 2020, an increase of 41% from the previous year. Since 2016, the bank’s fossil fuel financing has risen 142%, according to the report.
A BNP Paribas spokesperson said: “During the Covid-19 crisis, all sectors of the economy needed support and BNP Paribas, like other banks, played an important stabilizing role…. However, BNP Paribas supported the oil and gas sector to a lower extent than other sectors of activity.” The spokesperson pointed to the bank’s policies restricting financing from going to the most environmentally damaging fossil fuels and “the significant decrease of our coal exposure in 2020, which directly results from these policies.”
A striking finding for 2020 as a whole, said Jason Disterhoft, senior campaigner at Rainforest Action Network and one of the co-authors of the report, was the increase in financing for the 100 biggest companies that are expanding fossil fuels — including those involved in controversial pipeline projects. “Banks are very comfortable with financing the fossil fuel industry as a whole,” said Disterhoft, “but especially the worst clients that are doing the most to cook the climate.”
The report examined financing by sector and found a mixed picture. Financing for the top 35 companies involved in tar sands — one of the most environmentally destructive fossil fuels to extract and process — decreased 27% since 2019, to $16 billion.
But financing for coal mining increased slightly in 2020 compared with 2019, to $25.4 billion — a total increase of 25% since 2016, and largely from Chinese banks. This is despite warnings from the United Nations’ Intergovernmental Panel on Climate Change (IPCC) that the world must completely phase out coal by 2050 to have any hope of keeping warming below 2 degrees Celsius.
The report also analyzed the banks’ climate policies. Many restrict financing to coal companies, but, according to the report, these policies are often weak and heavily caveated. Several big banks have also pledged not to fund Arctic drilling, due in large part to resistance to these projects from the Gwich’in and other Indigenous groups. But broader climate policies for oil and gas financing are far from robust, the report says.
One potentially positive sign is banks’ longer-term climate commitments, such as pledges to reach net zero emissions by 2050. These policies have the potential to be a “powerful tool,” the report says, but will be largely meaningless unless banks act immediately.
“The policies and commitments that banks have put out so far give us no reason to believe they’re going to make these deep emissions cuts that the science demands,” said Disterhoft. The world must cut emissions in half by 2030 to keep within 1.5 degrees Celsius of warming, the IPCC warned in its landmark 2018 report, and that means aggressively phasing out fossil fuels.
For banks, said Disterhoft, this means an end to financing fossil fuel expansion and a commitment to phasing out fossil fuel financing altogether with interim targets to ensure they are on track to meet 2050 pledges.
The dip in global fossil fuel financing offers banks a choice, said Disterhoft. “The big question is, do banks continue the downward trajectory of the second half of 2020? Or do they just snap back to business as usual?”