5 years after signing Paris Agreement, banks continue to pump millions into fossil fuels

By Rahul Vaimal, Associate Editor
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Financial institutions are still providing billions of dollars to businesses extracting and burning the most polluting energy on earth, nearly five years after countries signed the historic Paris Agreement on climate change.

According to a joint report by 18 climate organizations, since the beginning of 2016, banks have provided more than $1.6 trillion in loans and underwriting services to fossil-fuel companies that are planning and expanding oil, gas and coal projects. The top three banks out of these are the US-based Citigroup, Bank of America and JPMorgan Chase & Co who lent and underwrote a combined $295 billion.

The findings are based on the banks and investors linked to companies involved in 12 energy projects globally.

Hindering efforts

According to a report compiled by the German climate organization Urgewald, the 12 projects outlined in the report together have the capacity to generate at least 175 gigatons of additional carbon-dioxide emissions. According to researchers at Climate Analytics, that is almost 75 percent of the remaining carbon budget, which is needed to limit global warming to 1.5 degrees Celsius.

“Instead of adopting a rigorous approach that would prevent the expansion of fossil fuels and facilitate their phase-out, global banks are refusing to break with the fatal growth trend of fossil extraction,” said the report.

US & China leads

The financing of domestic ventures such as oil drilling and fracking in the Permian Basin, covering parts of Texas and New Mexico, has been led by US banks. Over the past five years, Bank of America has loaned more than $54 billion to companies active in the basin, the study reveals. In China, the Industrial and Commercial Bank of China has invested over $14 billion into the country’s coal industry.

Fossil fuels also are receiving interest from fund managers. As of August, the American registered investment advisor Vanguard Group held more than $65 billion worth of shares and bonds of companies linked to projects in the Permian Basin. BlackRock Inc., the world’s largest asset manager, held about $110 billion in bonds and shares of companies involved in the projects featured in the report.

Public institutions are no better

Public institutions aren’t flawless, either. After the Paris Agreement, the World Bank Group has given over $12 billion in loans, guarantees, equity funding and technical assistance to fossil-fuel projects, according to the report. For example, in Mozambique, the World Bank is offering $80 million in technical assistance to help develop oil and gas fields.

“In 2020 we started to see the first major banks come out with commitments to reduce their overall financed emissions to net zero by 2050,” said Paddy McCully, a co-author of the report. “But these will mean little if we don’t start seeing the banks back away right now from these fossil fuel expansion mega projects which may lock in decades of emissions.”