Despite pledges to decarbonise, the world’s largest banks and financial institutions continue to finance expansion of fossil fuel production around the world, says a new report.
Despite pledges to decarbonise, the world’s largest banks and financial institutions have continued to finance the expansion of fossil fuel production around the world, according to a new report.
Published by a group of NGOs including Reclaim Finance and 350.org, the report says that after committing to net zero targets by joining the Glasgow Financial Alliance for Net Zero (GFANZ), financial institutions have continued pouring hundreds of billions of dollars into the companies developing fossil fuels.
The Glasgow Financial Alliance for Net Zero (GFANZ), was launched in April 2021 to facilitate and speed up the decarbonisation of the world economy, and contribute to making the global target of net zero emissions by 2050.
Nevertheless, the report called “Throwing Fuel on the Fire: GFANZ financing of fossil fuel expansion,” suggests that 161 of those institutions have been reneging on that promise.
“Financial institutions including Mitsubishi UFJ Financial and Nomura Asset Management have continued pouring hundreds of billions of dollars into the companies developing fossil fuels,” said Reclaim Finance, one NGO behind the report, in a press release.
According to the report, the 161 GFANZ members have provided financing to a total of 229 of the world’s largest fossil fuel developers. That means these institutions which have pledged to decarbonise are helping “to develop new coal power plants, mines, ports and other infrastructure, as well as new oil and gas fields and pipelines and LNG terminals.”
“The science is very clear: we need to stop developing new coal, oil and gas projects as soon as possible if we want to meet our climate goals and avoid a worst-case scenario,” Lucie Pinson, Executive Director and founder of Reclaim Finance, was quoted as saying.
Business as usual
Facilitating new fossil fuel projects is indeed counterproductive with the goal of limiting global warming to 1.5°C, and “will lock in greenhouse gas emissions for decades,” Reclaim Finance explained in its statement.
“Yet, it is business as usual for most banks and investors who continue to support fossil fuel developers without any restrictions, despite their high-profile commitments to carbon neutrality,” said Pinson.
Moreover, the report states that since joining the alliance, only a few of these institutions have implemented policies that limit financing for new fossil fuel projects or companies pursuing the initiatives.
Only 61 members have adopted schemes that deny support to companies pursuing new fossil fuel projects, and none have procedures that address the goal of limiting warming to under 1.5°C.
“Their greenwashing is all the more damaging as it casts doubt on the sincerity of all net zero commitments and undermines the efforts of those who are truly acting for the climate,” according to Pinson.
The United Nations added halting the financing of new fossil fuel initiatives among its net-zero criteria in June, and a November report emphasised that ceasing new fossil fuel financing must be a part of credible actions toward the net-zero goal.
While GFANZ doesn’t demand that all its members hop on the net-zero train, the sectoral alliances that are gathered under it, including the Net-Zero Banking Alliance (NZBA) and Net Zero Asset Managers initiative (NZAM), are parties to the net-zero pledge and are subject to the criteria.
Nevertheless, Reclaim Finance says that since joining GFANZ, 56 of the biggest banks in NZBA have provided $270 billion to 102 major fossil fuel expanders, and as of September 2022, 58 of the largest NZAM members held at least $847 billion of stocks and bonds in 201 major fossil fuel developers.
“GFANZ members are acting as climate arsonists,” Reclaim Finance Senior Analyst Paddy McCully was quoted as saying in their press release.
“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,” McCully added.
While halting the expansion of the well-established oil and gas industry, which is “one of the world’s largest and most powerful economic forces,” is a challenge, “the private financial sector is perhaps the most powerful global industry and it not only has a unique responsibility and capability to force change but through GFANZ has also in large part committed to doing so,” concludes the report.