Banks Remain Financially Committed to Oil Despite Transition Shift

By Irina Slav - May 16, 2024
• 
  
• The world’s 60 largest banks have invested $6.9 trillion in the oil and gas industry since the Paris Agreement was signed in 2016.
• Oil Change International reported, $3.3 trillion went towards expanding the production of hydrocarbon energy.
• 
  
• Worse still for climate NGOs, funding for fracking increased last year as well, reaching $59 billion.

There is no large international bank without a net-zero plan. These plans invariably include curbs in lending to the oil and gas industry. Yet despite these plans. Most of the world’s top lenders continue doing business with the oil industry—and they’ve been doing more of it lately.

The revelation comes from the 15^th annual Banking on Climate Chaos report authored by an organization called Oil Change International, part of a group of climate NGOs committed to putting an end to the oil and gas industry.

According to this report, the world’s 60 largest banks have invested $6.9 trillion in the oil and gas industry since the Paris Agreement was signed in 2016, marking the official start of the global net-zero shift. Of this, Oil Change International reported, $3.3 trillion went towards expanding the production of hydrocarbon energy.

This is bad enough news from the climate NGO perspective, certainly, but it is not the only bad news. What’s worse than a total of $6.9 trillion in hydrocarbon investment is an investment of $705 billion for 2023 alone—with some segments of the industry seeing increases in bank funding. This, in a world with a net-zero agenda, should not be happening, especially when banks are making decarbonization pledges and officially shrinking their business dealings with oil and gas producers. Yet not all of them are doing it.

Oil Change International, for lack of other tools, uses naming and shaming to sound the alarm of banks financing oil and gas, calling what it sees as the worst net-zero offenders “The Dirty Dozen”.

Those are led by JP Morgan, which invested $430.9 billion in the oil and gas industry between 2016 and 2023. At number two, we have Citi, with oil and gas exposure of $396.3 billion for the period, followed by Bank of America, which invested $333.3 billion between the signing of the Paris Agreement and last year.

The “Dirty Dozen” also includes lenders such as Barclays, MUFG, Scotiabank, and HSBC, as well as RBC and the report includes a lot of language aimed at making these banks feel embarrassed about their business practices. What it doesn’t do is ask the question that this information begs: why are banks investing so much in oil and gas?

The answer, of course, lies in the financial reports of oil companies and news reports such as the one that Global Witness released this February, stating Big Oil majors paid their shareholders a record $111 billion in dividends on the back of record profits for 2022. Those record profits were driven by the energy crunch in Europe that highlighted the importance of energy security in a way that everyone could understand—except climate NGOs, it appears.

The Oil Change International report says that financing for liquefied natural gas increased last year, hitting $120.9 billion. From their perspective, this must be a worrying trend. From the perspective of the banks themselves, this is good business—because demand for LNG is on the rise with Europe switching from pipelines to LNG carriers. Even record electricity generation from wind and solar in 2023 did not depress demand for liquefied gas.

Worse still for climate NGOs, funding for fracking increased last year as well, reaching $59 billion, provided to a total 236 companies by lenders including already named and shamed JP Morgan, Citi, and BofA, along with Morgan Stanley and Wells Fargo. The reason this happened was that demand for oil, including shale oil, was also on the rise, just like demand for natural gas.

The energy demand conundrum is the ultimate challenge for the climate NGO crowd. Protests and road-gluing spectacles may attract attention—although sometimes it is the wrong kind of attention—but the net-zero agenda cannot be followed if demand for hydrocarbons remains as strong as it has been in all the years since the signing of the Paris Agreement.

Attempts to destroy this demand, however, have invariably failed. The buildout of alternative sources of electricity to gas and coal are thriving, with governments spending billions on supporting them. Even so, wind and solar have been unable to cope with the rise in electricity demand and now there are warnings that more gas power plants would need to be built to respond to the expected surge in that demand that the IT sector will drive.

In transport, EV sales have grown strongly thanks to equally strong government support and yet even in Norway, which has the highest per-capita adoption rate, oil demand has not declined. Some of the world’s top carmakers are losing hundreds of thousands on the EVs they produce and they only keep doing it because their gasoline and diesel vehicles are still selling well.

Pointing the finger at banks for their lending to the oil and gas industry without acknowledging the reasons they are doing it would, in any other context, be considered sloppy work. Yet in this case, the reasons for banks to continue funding oil and gas are too inconvenient for the activists tracking this funding. These reasons are that oil and gas make money and that it is very good money—because people want reliable, affordable energy.

By Irina Slav for Oilprice.com

Big Banks Have Funded Climate Crisis With Nearly $7 Trillion Since Paris Agreement

"Banks that profit from climate chaos invent new greenwash every year, but we have the receipts that show how much money they put into fossil fuels," said one report author.

Protesters picket outside a Chase Bank branch in November 2019.
(Photo: Erik McGregor/LightRocket via Getty Images)

OLIVIA ROSANE
May 13, 2024
COMMON DREAMS

The world's 60 biggest banks funded fossil fuels to the tune of $6.9 trillion in the eight years following the Paris agreement.

That's the conclusion of the 15th annual Banking on Climate Chaos report, which was published Monday and also found that the financial institutions lavished $705 billion on oil, gas, and coal in 2023—the hottest year on record.

"Financiers and investors of fossil fuels continue to light the flame of the climate crisis," Tom BK Goldtooth, report co-author and executive director of the Indigenous Environmental Network, said in a statement. "Paired with generations of colonialism, the fossil fuel industry and banking institutions' investment in false solutions create unlivable conditions for all living relatives and humanity on Mother Earth."

U.S. financial giants JPMorgan Chase, Citigroup, and Bank of America topped the "dirty dozen" list of the banks that gave the most to fossil fuels since 2016, at $430.9 billion, $396.3 billion, and $333.2 billion respectively. In 2023, U.S. banks provided 30% of total fossil fuel finance, the largest share of any country. JPMorgan also topped the 2023 list at $40.88 billion, with Japanese bank Mizuho Financial overtaking the No. 2 spot with $37.04 billion, and Bank of America remaining in third place with $33.68 billion.




"The science shows that over half of fossil fuels in existing fields and mines must stay underground to limit global warming to 1.5°C, and our Big Oil Reality Check analysis finds that none of the major oil and gas companies we analyze plan to do anything even close to what is needed to hold global warming to 1.5°C," report-co-author David Tong, the global industry campaign manager at Oil Change International, said in a statement. "By injecting a staggering $70[5] billion into fossil fuel financing in 2023 alone, the world's largest banks fund the climate chaos fossil fuel companies wreck on communities worldwide."

The report also tracks how much the financial institutions spent on companies that had fossil fuel expansion plans, according to the Global Oil and Gas Exit List and the Global Coal Exit List. The banks spent $3.3 trillion since 2016 and $347.5 billion in 2023 alone on these companies, or nearly half of total expenditures. Report co-author April Merleaux, research and policy manager at Rainforest Action Network, called the 2023 expansion finance figure "dangerous and inconsistent with real climate commitments."

Overall, Citibank has spent the most on fossil fuel expansion since 2016 at $204 billion, while JPMorgan was the top funder of expansion in 2023 with $19.3 billion.

"As this report is worth nothing if it doesn't turn into action, we call on the banks to finally become fossil free banks, and on the wider climate justice movement to use this data to mobilize for a fossil free banking world."

The researchers also looked at what fossil fuel companies and activities the banks were financing. All told, they considered funding to 4,228 companies. Clients with major expansion plans in 2023 included the pipeline companies Enbridge, TC Energy Corp, and Sempra as well as NextDecade Corp and Rio Grande Valley LNG, which are developing new liquefied natural gas (LNG) export capacity.

Fossil fuel financing did decrease in 2023, down from $778.7 billion in 2022.

"The trend of decreased financing from traditional banks to fossil fuel companies is good news, tempered by the reality that financing for fossil fuel expansion should be zero," the report authors wrote. "But there is little evidence that the decline is driven by voluntary commitments by the banks, especially given the policy rollbacks among major banks."


Indeed, in 2023, Bank of America rolled back commitments to not fund Arctic drilling, thermal coal, or coal-fired plants. Instead, the report authors suggested the downturn in finance was due to external economic and geopolitical factors.

"Unless banks take action to rule out finance for such clients, the decline may not be permanent," they warned.

When it came to the funding of individual high-risk fossil fuel activities, funding for overall expansion, fracking, tar sands, coal- and gas-power plants, and Amazon, Arctic, and deepwater oil and gas all declined. At the same time, funding for metallurgical coal, coal mining, and methane LNG all increased, with LNG funding rising from $116 billion in 2022 to $121 billion in 2023.

"In a year with record climate impacts, I am shocked to see financing for any category of fossil fuels increase. And yet in 2023 this report shows a big increase in financing to companies developing methane gas terminals and related infrastructure," Merleaux said. "Banks should be listening to those on the frontlines and stepping away from these projects."

This year the report—which is a collaboration between Rainforest Action Network; BankTrack; the Center for Energy, Ecology, and Development; Indigenous Environmental Network; Oil Change International; Reclaim Finance; Sierra Club; and Urgewald— features updated methodology that primary sources revealing the role of banks in corporate financial deals. The banks were given a chance to review the data and respond.

"Wall Street's top concern is its profit. Our top concerns are the climate and human rights. Banks that profit from climate chaos invent new greenwash every year, but we have the receipts that show how much money they put into fossil fuels," Merleaux said. "Our new methodology uncovers previously unreported details on banks' support for fossil fuels and gives campaigners new tools to hold them accountable."

Accountability is the report's main goal, according to co-author Diogo Silva, who leads the banks and climate campaign at BankTrack.

"As this report is worth nothing if it doesn't turn into action, we call on the banks to finally become fossil free banks, and on the wider climate justice movement to use this data to mobilize for a fossil free banking world," Silva said. "Later might just be too late. Fossil banks, no thanks!"