Katerina Swanson
Despite growing pressure from investors, customers, and regulators, banks continue to invest heavily in fossil fuels, contributing significantly to climate change and environmental degradation. According to various reports, the world's largest banks have provided trillions of dollars in financing to the fossil fuel industry since the Paris Agreement. For example, the top six US banks, including JPMorgan Chase, Citi, and Bank of America, invested over $1.8 trillion in fossil fuels between 2016 and 2023. These investments often fund projects that increase emissions and harm communities, despite banks' public commitments to net-zero and sustainability. While some banks have adopted policies to exclude fossil fuel financing, loopholes and a lack of standardized metrics for eco-friendly banking allow them to continue funding environmentally detrimental projects. As a result, individuals are increasingly seeking eco-conscious alternatives, such as community banks and credit unions that do not finance fossil fuels.
| Characteristics | Values |
|---|---|
| Amount invested by the world's largest banks in fossil fuels since 2016 | $6.9 trillion |
| Amount invested by the world's largest banks in fossil fuels in 2024 | $869 billion |
| Amount invested by the top 4 US banks in fossil fuels in 2024 | $289 trillion |
| Amount invested by the world's largest banks in fossil fuels in 2023 | $700 billion |
| Amount invested by the world's 60 largest banks in fossil fuels since the 2015 Paris Agreement | $5.5 trillion |
| Amount invested by the top 6 US banks in fossil fuels since the Paris Agreement | $1.8 trillion |
| Amount invested by the world's largest banks in fossil fuels in 2021-2024 | N/A |
| Amount invested by the world's largest banks in liquefied methane gas in 2023 | $120.9 billion |
| Amount invested by the world's largest banks in fossil fuels in 2022 | $385 billion |
| Types of fossil fuel projects financed by banks | Tar sands, arctic drilling, coal mining, and liquefied natural gas |
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What You'll Learn
Top fossil fuel financiers
According to the 15th annual Banking on Climate Chaos (BOCC) report, the world's 60 largest private banks financed fossil fuels with $6.9 trillion since the Paris Agreement. The following are the top financiers among these banks:
JPMorgan Chase
JPMorgan Chase is the world's top fossil fuel financier, committing $40.8 billion to fossil fuel companies in 2023. It is also the biggest funder of oil and gas in the Arctic, providing $122 million in 2023. Additionally, the bank financed fracking with $6 billion in 2023.
Citi
Citi is the worst funder of fossil fuel expansion since the Paris Agreement, providing $204 billion since 2016 to companies building pipelines, oil rigs, and gas terminals. It is also the world's biggest funder of liquefied natural gas (LNG), having provided $55 billion to the top LNG companies since 2016. In 2023, Citi was the second-largest Arctic oil and gas funder, contributing $246 million.
Bank of America
Bank of America is the third-worst fossil fuel funder, exhibiting several climate policy failures. The bank quietly dropped its exclusions on Arctic drilling, thermal coal, and coal-fired power plants. It has also not committed to disclosing its energy financing ratio or adopting near-term absolute emissions targets. Bank of America is the top financier of Amazon oil and gas companies, committing $162 million to companies extracting oil and gas in the Amazon biome.
Wells Fargo
Wells Fargo is one of the top six US banks financing fossil fuels, accounting for over $1.8 trillion since the Paris Agreement.
Goldman Sachs
Goldman Sachs is another top US bank that has contributed significantly to fossil fuel financing, with commitments totaling over $1.8 trillion since the Paris Agreement.
Morgan Stanley
Morgan Stanley completes the list of the top six US banks financing fossil fuels, having invested over $1.8 trillion in the industry since the Paris Agreement.
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Banks' net-zero commitments
Banks have increasingly embraced net-zero commitments as part of their strategy to address climate change. Over 120 banks have committed to reaching net zero, with more than 138 banks representing over 40% of global banking assets making explicit net-zero commitments through the Net Zero Banking Alliance (NZBA). These banks have committed to aligning lending and investment portfolios with net-zero emissions by 2050, with intermediate targets for 2030 or sooner. However, there is limited evidence to suggest that these commitments lead to significant reductions in financed emissions or substantial increases in financing for sustainable activities.
To achieve their net-zero targets, banks must embed their commitments into their operations, including commercial execution, credit operations, and management reporting. This involves embedding targets into credit policies, data, and incentives, as well as building dedicated frameworks for activities such as product development, credit assessment, and pricing. Leading banks are also starting to digitize and automate the process of measuring financed emissions and considering how to incentivize bankers to achieve net-zero targets.
While some banks are taking lender divestment from fossil fuels as a given, studies have shown mixed results. There is some evidence of lender divestment from firms in the coal mining sector, and lenders charging higher interest rates to polluting firms. However, other studies have found no evidence of divestment from firms with high carbon emissions. Instead of divesting, net-zero banks can continue to lend to polluting firms but engage by pushing them to reduce their emissions, such as by encouraging them to set climate targets and invest in cleaner technologies.
Despite their net-zero commitments, the top six US banks financed fossil fuels with $1.8 trillion since the Paris Agreement, with JPMorgan Chase, Citi, and Bank of America accounting for a significant portion of this financing. In 2023 alone, banks invested more than $700 billion in fossil fuels, and nearly half of the total financing from the 60 largest banks went towards the top fossil fuel expansion companies. This has led to criticism from investors, customers, regulators, and frontline communities, who are calling for banks to stop financing dirty fossil fuel projects and transition to a clean energy future.
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Fossil fuel expansion
The magnitude of banks' role in fossil fuel expansion has been hidden from the mainstream until recently. Banks provide loans and underwriting to fossil fuel companies, supporting projects such as tar sands, arctic drilling, and coal mining. These financial contributions enable fossil fuel companies to start and sustain projects that contribute to environmental degradation and harm communities.
Despite some banks adopting policies that prohibit project-level financing for fossil fuels, loopholes exist, and they often don't prohibit financing the companies that own and develop such projects. Additionally, while some banks have made commitments to net-zero emissions and restricting financing for polluting companies, their progress has been stalled by a lack of near-term emissions reduction targets and credible plans.
The impact of banks' investments in fossil fuel expansion has been felt disproportionately by frontline communities, including Indigenous Peoples, Black and Brown communities, low-wage workers, women, fishers, and smallholder farmers, who often live in poverty.
To address this issue, individuals can resolve to divest their money from banks that invest in fossil fuels and seek out community banks or credit unions that don't finance fossil fuels. Additionally, regulatory measures and pressure from investors, customers, and regulators are necessary to hold banks accountable for their pledges and transition towards a clean energy future.
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Eco-friendly alternatives
If you're looking for eco-friendly alternatives to traditional banks, there are a few things to keep in mind. Firstly, it's important to remember that your deposits in a bank don't just sit there; they help banks make loans and investments for various projects. So, if you're committed to reducing your carbon footprint, you should ensure that your money in the bank isn't funding projects that harm the environment.
Eco-friendly banks are those that acknowledge the impact of their lending and investment choices on the planet and actively choose to decrease funding for environmentally detrimental projects. These banks often put their money towards green causes and renewable energy projects, while being transparent about their efforts to fight the climate crisis.
- Climate First Bank: This bank donated over $200,000 to non-profit partners in 2023 and is also involved in financing solar energy systems and reducing solar costs. It has several certifications, including Certified B Corp, 1% for the Planet, Fossil Free certified, and GA BV member.
- Atmos Financial: Atmos Financial is an online banking platform that has pledged to finance zero fossil fuel companies and projects. It offers a Climate-Positive Savings Account that pays 2.40% APY if you make monthly donations of at least $1 to an eco-friendly non-profit organization.
- B-Corp Banks: Certified B-Corporations are businesses that meet high standards of verified social and environmental performance, public transparency, and legal accountability. They aim to balance profit and purpose, making them a good choice for those who want their money to be used as a force for good.
When considering eco-friendly alternatives, it's important to be wary of greenwashing. Some banks may make sustainability commitments that are not directly tied to their financing decisions. Look for banks that provide clear and concrete examples of how banking with them helps combat the climate crisis and offer strong rates and perks alongside easy accessibility.
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Fossil fuel finance risk
The financial rationale for investing in the fossil fuel industry is weakening. A report by the Institute of Energy Economics and Financial Analysis (IEEFA) highlights that the fossil fuel sector is unprepared to manage the challenges of the coming decades, such as disruption and destabilization in fossil fuel commodity markets, competition from renewable energy, and growing investor consciousness of climate change's financial risks. As a result, investors are re-evaluating the role of fossil fuels in their portfolios.
The risks of fossil fuel finance are not limited to financial losses but also include ethical and environmental concerns. Climate change caused by the fossil fuel industry disproportionately impacts Indigenous Peoples, Black and Brown communities, low-wage workers, women, fishers, and smallholder farmers, often living in poverty. By continuing to finance the fossil fuel industry, banks are exacerbating the climate crisis and delaying the transition to a clean energy economy.
To address these risks, there is a growing divestment movement of institutional and individual investors who are withdrawing their investments from fossil fuels. Initiatives like Fossil Free Funds provide investors with tools to assess the fossil fuel exposure and carbon footprint of mutual funds and ETFs, enabling them to make more informed and values-aligned investment decisions. Additionally, some companies, like Google, have introduced fossil-free funds within their 401(k) plans, offering employees a climate-conscious investment option.
To summarize, fossil fuel finance risk encompasses the financial, ethical, and environmental dangers associated with investing in the fossil fuel industry. The weakening financial rationale, underperformance, and negative long-term outlook of the fossil fuel sector, coupled with increasing awareness of climate change risks, are driving investors to reconsider their investments. Initiatives promoting fossil fuel divestment and the adoption of fossil-free funds offer alternatives that align with a more sustainable future.
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Frequently asked questions
Yes, according to the Banking on Climate Chaos report, the world's 60 largest banks have invested $6.9 trillion in fossil fuels since 2016, with US banks JPMorgan Chase, Citi, Bank of America, Wells Fargo, Goldman Sachs, and Morgan Stanley accounting for over $1.8 trillion.
The banks that finance the most fossil fuels are JP Morgan Chase, Wells Fargo, Citi, Bank of America, TD, Morgan Stanley, and Goldman Sachs. These banks are also some of the most popular in the US, holding almost half of American bank accounts.
You can use resources such as Fossil Free Funds, which provides fossil fuel finance risk scores for banks and funds that invest in banks. You can also refer to guides that list eco-friendly banks and credit unions, such as the one provided by Mighty Deposits.
