Ameer Randolph
Despite growing concerns about climate change, many banks continue to finance fossil fuel projects. In 2023, the world's largest banks provided over $700 billion in financing for fossil fuel projects, with US-based JPMorgan Chase being the largest financier of fossil fuels worldwide. Other top financiers include Citi, Bank of America, Wells Fargo, Goldman Sachs, and Morgan Stanley. These banks have been criticized for supporting environmentally and socially harmful practices, such as fracking and liquefied natural gas (LNG) exports. While some banks have made efforts to reduce their exposure to fossil fuels, the transition to cleaner energy sources is not happening fast enough. As a result, banks are facing increasing pressure from shareholders and the public to align their lending practices with global climate goals and stop underwriting fossil fuel projects.
| Characteristics | Values |
|---|---|
| Banks that finance fossil fuel projects | JPMorgan Chase, Citi, Bank of America, Wells Fargo, Goldman Sachs, Morgan Stanley, Deutsche Bank Securities Inc., Crédit Mutuel, Mizuho Financial, JP Morgan Chase, Citigroup, Royal Bank of Canada |
| Fossil fuel financing amount | $705 billion in 2023 |
| Fossil fuel financing trend | Down for the second year in a row in 2023 |
| Number of banks that increased fossil fuel financing in 2023 | 27 |
| Number of banks that decreased fossil fuel financing in 2023 | 33 |
| Fossil fuel financing since the Paris Agreement | $6.9 trillion |
| Fossil fuel financing by the top 6 US banks since the Paris Agreement | $1.8 trillion |
| Fossil fuel financing by JPMorgan Chase since the Paris Agreement | Over $192 billion |
| Fossil fuel financing by Citi since 2016 | $55 billion |
| Fossil fuel financing by Citi in 2023 | $246 million |
| Fossil fuel financing by JPMorgan Chase in 2023 | $122 million |
| Fossil fuel financing by JPMorgan Chase for fracking in 2023 | $6 billion |
| Fossil fuel financing by the top 6 US banks for liquefied gas exports in the last 8 years | $226 billion |
Explore related products
What You'll Learn
- Fossil fuel financing by banks is declining, but not fast enough
- The world's largest fossil fuel financers include JPMorgan Chase, Citi, and Bank of America
- Banks underwrite bonds and stocks, providing financial backing to fossil fuel companies
- Fossil Free Funds provides ratings for banks and insurers based on fossil fuel involvement
- Banks face pressure from clients, customers, and shareholders to move away from fossil fuels
Fossil fuel financing by banks is declining, but not fast enough
Underwriting bonds and stocks is a critical component of banks' fossil fuel financing. By serving as underwriters, banks enable fossil fuel companies to secure funds needed for exploration, production, and development. This indirect support for fossil fuel operations must be addressed to ensure a comprehensive shift away from fossil fuels.
While some banks have made efforts to reduce their fossil fuel financing, the overall trend is still disappointing. For example, France's Crédit Mutuel has worked towards zero coal exposure in financing and investment portfolios by 2030, discontinuing projects that conflict with its environmental goals. Additionally, there is growing client and customer pressure on banks to divest from fossil fuels, which may be the quickest path to significant change.
To accelerate the transition to a sustainable future, banks must increase transparency about their lending practices and actively support clean energy projects. The International Energy Agency has stated that achieving net-zero by 2050 requires ceasing investment in new fossil fuel supply projects. By financing fossil fuel expansion, banks are not only contributing to climate change but also facing increased financial risks associated with high-carbon industries.
In conclusion, while fossil fuel financing by banks is declining, it is not happening at the rapid pace needed to align with global climate goals. Banks have a crucial role in facilitating the transition to a clean energy economy, and stronger action is required to prevent further harm to our planet and communities.
The Mystery of Carbon: Fossil Fuels' Origin Story
You may want to see also
Explore related products
The world's largest fossil fuel financers include JPMorgan Chase, Citi, and Bank of America
Despite the Paris Agreement, the world's 60 largest private banks financed fossil fuels with USD $6.9 trillion between 2016 and 2023. JPMorgan Chase, Citi, and Bank of America are among the top financiers of fossil fuel projects, contributing significantly to the $1.8 trillion provided by US banks. These banks have been criticised for fuelling the climate crisis and poisoning communities by providing substantial funding to the fossil fuel industry.
JPMorgan Chase is the world's top fossil fuel financier, committing $40.8 billion to fossil fuel companies in 2023. They have also been the largest funder of oil and gas projects in the Arctic, providing $122 million in 2023. Additionally, JPMorgan Chase financed fracking with $6 billion in the same year.
Citi, the second-largest Arctic oil and gas funder, provided $246 million to top Arctic production companies in 2023. They are also the world's biggest funder of liquefied natural gas (LNG), having provided $55 billion since 2016. Citi has been identified as the worst funder of fossil fuel expansion since the Paris Agreement, investing $204 billion in new pipelines, oil rigs, gas terminals, and more.
Bank of America, ranking third on the 2023 list of worst fossil fuel funders, has made significant commitments to harmful practices. The bank has abandoned its exclusions on Arctic drilling and coal-related projects, and it invested $162 million in companies extracting oil and gas in the Amazon biome. These actions contradict its net-zero commitments and contribute to the climate crisis.
Together, JPMorgan Chase, Citi, and Bank of America represent a significant portion of global fossil fuel financing. Their continued funding of fossil fuel projects and expansion plans undermines climate commitments and exacerbates environmental and community harm.
The Future of Fossil Fuels: Can We Quit?
You may want to see also
Explore related products
Banks underwrite bonds and stocks, providing financial backing to fossil fuel companies
Banks play a significant role in underwriting bonds and, to a lesser extent, stocks, which provides financial support to fossil fuel companies. This process allows fossil fuel companies to raise capital and secure the funds required for their operations, including exploration, production, and resource development. The involvement of banks in underwriting these financial instruments is a critical component of their fossil fuel financing activities.
For instance, the Banking on Climate Chaos report revealed that the world's top 60 banks provided USD $6.9 trillion in financing to fossil fuel companies since the Paris Agreement. Notably, U.S. banks JPMorgan Chase, Citi, Bank of America, Wells Fargo, Goldman Sachs, and Morgan Stanley contributed over $1.8 trillion. These banks have been criticized for their involvement in financing environmentally and socially harmful projects, such as liquefied gas exports and Arctic oil and gas production.
In addition to underwriting bonds and stocks, banks also provide syndicated loans, bond issues, and other underwriting arrangements to fossil fuel companies. This diverse range of financial services enables fossil fuel companies to expand their operations and pursue new projects. The Banking on Climate Chaos report also highlights that nearly half of the $6.9 trillion, amounting to $3.3 trillion, was directed towards the top fossil fuel expansion companies.
While some banks have made commitments to transition towards more sustainable business models, their actions often fall short. For instance, Bank of America has been criticized for quietly dropping its exclusions on directly financing Arctic drilling, coal mining, and coal-fired power plants. This discrepancy between commitments and actions underscores the need for stronger regulations and oversight to ensure that banks contribute to mitigating climate change rather than exacerbating it.
Furthermore, it is important to recognize the impact of "greenlaundering," which conceals the full scale of fossil fuel financing. This practice involves banks and financial institutions engaging in activities that create the appearance of environmental responsibility while continuing to provide substantial financial support to fossil fuel companies. To address this issue, organizations like Fossil Free Funds are working to expose the true extent of fossil fuel financing and provide transparent ratings of banks' involvement in these activities.
Fossil Fuels: Sustainable or Not?
You may want to see also
Explore related products
Fossil Free Funds provides ratings for banks and insurers based on fossil fuel involvement
Fossil Free Funds provides ratings for banks and insurers based on their fossil fuel involvement. The ratings are designed to help investors identify investments that avoid climate risks from financial institutions. The ratings use third-party expert data on bank lending and insurer policies from Banking on Climate Chaos and Insure Our Future.
Banking on Climate Chaos looks at 60 or 65 of the largest commercial and investment banks and tracks their total fossil fuel financing, including lending and underwriting debt and equity issuances. The data covers 2021 through 2024. The top bank, JPMorgan Chase, had over $192 billion in fossil fuel financing over this time period. For fund ratings, the bank financing amounts are normalised from USD to a 0-10 scale, with 10 being the worst possible score, representing a company's fossil fuel finance risk score.
Insure Our Future looks at 30 of the largest primary insurers and reinsurers and rates their fossil fuel insurance underwriting policies. The insurance policy ratings are normalised to a 0-10 scale, with 10 being the worst possible score, representing a company's fossil fuel insurance risk score.
Funds are then graded based on their exposure to banks and insurers from the Banking on Climate Chaos and Insure Our Future reports, with funds having no exposure being assigned an A grade. The grades can be interpreted as follows: a fund with a worse grade has more exposure to banks from the Banking on Climate Chaos report or exposure to banks with higher financing amounts than funds with a better grade.
Fossil Free Funds also provides a tool called Weapon Free Funds, which explores how retirement savings might be financing arms manufacturers of nuclear missiles, cluster bombs, and other controversial military weapons.
Fossil Fuels and Electric Batteries: What's the Connection?
You may want to see also
Explore related products
Banks face pressure from clients, customers, and shareholders to move away from fossil fuels
Banks are facing increasing pressure from clients, customers, and shareholders to move away from fossil fuels. This pressure is driven by concerns about the climate crisis and the role of banks in financing fossil fuel projects. According to a report by a collection of climate organizations titled "Banking on Climate Chaos 2021", the 60 largest commercial and investment banks have financed fossil fuel companies with $3.8 trillion between 2016 and 2020. This number has increased, with the latest reports showing that the top 6 US banks financed fossil fuels with $1.8 trillion since the Paris Agreement.
The divestment movement has been driven by client and customer pressure, and shareholders are also playing an important role by raising awareness about the material risks to financial institutions. As a result, banks are being pressured to pivot their lending practices to support a greener economy. For example, in 2015, after a 4-year campaign, the RAN Bank of America became the first major bank to commit to stepping away from coal mining. Similarly, all six big Wall Street banks are now moving away from coal mining, and 24 banks globally have policies in place to distance themselves from financing coal mining and coal power.
However, the transition away from fossil fuels is challenging due to the substitution of finance between banks in syndicated deals, which inhibits a sector-wide phase-out of new fossil fuel finance. Additionally, banks are reluctant to lend to fossil fuel producers due to public perception and environmental activism. Many large energy companies that are still active in fossil fuels are transitioning to clean energy and will require funding for these projects.
To address these challenges, financial regulation and international cooperation are critical for a timely and just phase-out of fossil fuel finance. The UN-convened Net Zero Banking Alliance (NZBA) was launched in 2021 to align banking activities with climate goals. While some banks are increasing their business with fossil fuel companies, others are decreasing it, and there is a clear need for the industry to address the material risks that the coal, oil, and gas industries face.
Fossil Fuels: Finite Resources, Infinite Problems
You may want to see also
Frequently asked questions
Some of the world's largest banks have financed fossil fuel projects. The top 6 US banks—JPMorgan Chase, Citi, Bank of America, Wells Fargo, Goldman Sachs, and Morgan Stanley—have provided over $1.8 trillion since the Paris Agreement.
Banks finance fossil fuel projects by providing loans and underwriting debt and equity issuances. Underwriting bonds is a critical component of banks' fossil fuel financing as it enables fossil fuel companies to secure the funds needed for their operations, including exploration, production, and development.
The world's big banks financed $705 billion in fossil fuel projects in 2023, a decrease from $778.7 billion in 2022. However, there was an increase in financing for companies developing methane gas terminals and related infrastructure.
Yes, some banks have committed to reducing their exposure to fossil fuel financing. For example, France's Crédit Mutuel aims for zero coal exposure in financing and investment portfolios by 2030 and has discontinued financing for projects that do not align with its environmental goals.
