There’s no way to sugarcoat this. The world’s largest banks are providing the money fossil fuel companies need so they can continue degrading the environment to the point where the humans may no longer be able to survive on our little blue planet at the far edge of a minor galaxy. Banks loan money. That’s what they do. When they loan money, they make a profit because of the interest borrowers pay. Without banks, the global economy would come to a screeching halt.
Morality has nothing to do with banking. The objective is to make the biggest profits you can because — to those in the business — what else is there? These people would loan money to arsonists to buy gasoline if there’s a profit to be made. A report from Banking On Climate Chaos claims the world’s banking industry has loaned $4.6 trillion to the fossil fuel industry in the 6 years since the Paris Climate Accords were agreed to in Paris in 2015.
In 2021, the UK hosted the annual COP meeting, where former Bank of England governor Mark Carney introduced the Glasgow Financial Alliance for Net Zero (GFANZ) initiative. At that time, the UK boasted that 450 organizations in 45 countries with assets of more than $130 trillion had agreed to align their investments with the goal of limiting global temperature rises to 1.5º C above pre-industrial levels.
But despite all the happy talk, the glad-handing, and smiling for the cameras, banks have pretty much continued to do what they have always done — invest heavily in fossil fuel. Do they care? Apparently not. The shameless pursuit of profits from activities that pollute the environment and endanger the lives of all 8 billion human inhabitants of the planet Earth continues, according to data compiled by Reclaim Finance. “Non-state actors cannot claim to be net zero while continuingvto build or invest in new fossil fuel supply,” says Catherine McKenna, chair of the UN’s Expert Group on Net Zero.
Fossil Fuel Forever?
Paddy McCully, senior analyst at Reclaim Finance, tells The Guardian, “GFANZ members are acting as climate arsonists. They’ve pledged to achieve net zero but are continuing to pour hundreds of billions of dollars into fossil fuel developers. 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.”
GFANZ companies are also failing to divest from fossil fuels. In the net zero asset managers grouping — another part of GFANZ — at least $847 billion in assets in more than 200 fossil fuel companies were held by the 58 largest members as of last September, according to the report published this month. It also found that few of the GFANZ members had put investment polices in place that would stop them from financing new fossil fuel projects, even though all of them are supposed to be shifting their portfolios to be in line with the 1.5º C goal confirmed at COP 26 in Glasgow.
Lucie Pinson, executive director and founder of Reclaim Finance, accused the alliance of greenwashing. “It is business as usual for most banks and investors [involved in GFANZ], who continue to support fossil fuel developers without any restrictions, despite their high-profile commitments to carbon neutrality,” she said. “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.”
One of the biggest banks involved in GFANZ is HSBC, which announced restrictions on oil and gas financing last month. But it has approved 58 transactions worth $12 billion in lending to fossil fuel developers since joining a GFANZ grouping in April 2021, according to the Reclaim Finance report.
A spokesperson for HSBC told The Guardian: “HSBC’s aim is to reduce emissions in line with a 1.5º C pathway, promote energy security, and ensure energy affordability and access, as part of our commitment to a net zero future. In line with our 1.5º C-aligned 2030 financed emissions targets and updated energy policy, we will no longer provide new finance or advisory for the specific purposes of new oil and gas fields or related infrastructure or for the most carbon-intensive oil assets. To accelerate an orderly transition to net zero, we continue to support clients who are playing an active role in the energy transition, including through regular engagement on their transition plans.”
The spokesperson added that fossil fuels were still likely to be necessary for a transition period. “The International Energy Agency’s seminal Net Zero 2050 report outlines that an orderly transition requires continued financing and investment in existing oil and gas fields to maintain the necessary output and security of supply — with 2020 financing levels maintained through 2030 and declining to half thereafter.”
However, Reclaim Finance pointed out that the IEA has also made clear that no new fossil fuels development can take place if the world is to remain within the limit of 1.5º C of heating. It has identified the fossil fuel developers in the report as those engaged in expansion of their assets, such as new drilling and new mining. Nevertheless, HSBC’s approach had won praise from climate advocate Bill McKibben.
A spokesperson for GFANZ told The Guardian, “This report focuses on an important aspect of the energy transition. It’s clear a lot of work needs to be done to ensure the world is deploying capital consistent with a 1.5º C pathway, which is exactly why GFANZ was created. Based on research GFANZ commissioned last year, we know that investment in renewables needs to be four times the levels going into fossil fuels by 2030 to restrict climate change consistent with the aims of the Paris agreement.
“GFANZ members will detail how they are financing the transition of the energy sector when they publish their interim targets and transition plans. This will allow government, investors and civil society organisations to track progress. We call on financial institutions not in GFANZ to join the alliances that comprise GFANZ to provide transparency and become part of the solution.”
António Guterres, Secretary General of the United Nations says, “The first duty of leadership is to protect people from clear and present dangers. Now nothing could be more clear or present than the danger of fossil fuel expansion.” But the economic systems humans have chosen take no account of such dangers. Until they do, the only factor that will decrease the level of investment in fossil fuels is a decline in profits. That will happen, eventually, but by then it may be too late to keep the Earth from becoming uninhabitable by humans and many other species. We need a better economic system if we are to survive.
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