British, European and other major global banks spent just 7% of their financing for energy companies on renewables between 2016 and 2022, ESG Insight was told this morning.
The new figures indicate practically every financial institution fails to meet global commitments on net zero emissions by 2050 since it shows relatively low financial support through loans and bond underwriting for clean energy.
Across the world, at $181 billion Citi and JP Morgan Chase each pumped the most into the energy companies examined between 2016 and 2022 but just 2% went to renewables.
Similarly, only 2% of Barclays’ financing of the energy companies examined went to renewables. Royal Bank of Canada is at just 1%, Mizuho 4% and HSBC 5%.
The figure stands at 7% for French bank BNP Paribas.
Missed climate goals
The data, produced for Sierra Club, Fair Finance International, BankTrack and Rainforest Action Network, “calls into question pledges from the industry-led Glasgow Financial Alliance for Net Zero (GFANZ), namely that 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,” the groups wrote.
However, no bank looks set to reach this minimum requirement.
“Many banks claim that they continue to provide financing for fossil fuel clients in order to help those clients in their climate transition,” Adele Shraiman, campaign representative with the Sierra Club’s Fossil-Free Finance campaign, said this morning.
“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, Sierra Club
“This data calls into question that claim, and gives proof that banks must get serious about financing the clean energy transition,” she added.
“In order to reach the goals of the Paris Agreement, we know that investments in renewable energy must dramatically increase this decade,” Shraiman noted.
Loans and bonds
Bank loans and bond underwriting for renewables went from 7% in 2016 of the overall financing of the energy companies examined to a high of 10% in 2021 but virtually stagnated between these years, rather than showing any positive trend.
The total amounts of clean energy financing in these years remained relatively low: $23.2 billion in 2016 and $34.5 billion in 2021.
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.
Perhaps somewhat surprisingly, the data reveals that banks that are members of GFANZ actually provide less financing for renewable energy, on average, than their counterparts that are not in the alliance.
Leaders of the industry-led group, which is committed to accelerating the energy transition by the finance sector, are vocal about the need for funding for low-carbon energy to quadruple that of dirtier energy like coal, oil, and gas, by the end of this decade.
When asked this week whether Citi had ever refused to fund new fossil fuel projects, CEO Jane Fraser responded during a session at the World Economic Forum in Davos: “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.”
Climate finance groups have criticised banks over the data and questioned the climate commitments many have made.
In addition, Rémi Hermant, policy analyst at Reclaim Finance said today that “scaling up financing to clean energy and phasing out support for fossil fuels are the two sides of the climate equation.”
He added: “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,” Hermant concluded.
- Helen Goulden OBE: there is ‘Work to be done’ for UK businesses to include ‘S’ in ESG
- Analysis: What does the future hold for Green, Social and sustainable Bonds?
- Investors increasingly demand detailed data to understand their companies’ ESG efforts
- Opinion: Why ESG integration is required to promote a just energy transition in Africa