Big banks called out on fossil fuel financing

A new study from the University of Gothenburg in Sweden has examined big banks’ commitments to address climate change – and finds they are coming up short.

The researchers were interested in how banks understand their role as actors who can mitigate the climate crisis, and whether banks are taking responsibility for their contributions to climate change.

“It can be argued that banks have the capacity to significantly help reduce the amount of fossil fuels produced in their capacity to provide or not provide finance to the fossil fuel industry,” the authors write.

To investigate, they analysed annual reports for the period 2015–19 from the 10 global banks that put the most money into the fossil fuel industry. The banks were based in countries including the US, UK, Canada and Japan.

The 10 banks had collectively injected $425.92 billion into fossil fuel financing in 2020 alone.

The study found an increase in mentions of climate change in the banks’ annual reports in the study period, particularly since 2017.

However, the banks appeared to focus on the easier targets of increasing ‘green’ finance opportunities or reducing their electricity consumption, rather than confronting the climate impacts of their investments in the fossil fuel industry.

“If one should ‘follow the money’ to find the culprits of a crime, what does that say for the significant amounts of money that the financial industry puts into fossil fuels?” asks senior author Åsa Löfgren, an associate professor in the Department of Economics at the University of Gothenburg.

“There is little or no recognition of the indirect, but significant, effect of their clients’ emissions.”

“Banks seem to see opportunities – like new green products and services – as the primary way of engaging with clients in relation to climate change,” adds first author Jasmine Elliot, a Gothenburg PhD student.

“While this may be a relevant step in promoting sustainability, it still does not address the causal, negative contribution they have had and continue to have on the climate via their main financing activities.”

Elliot and Löfgren call for more effective climate mitigation policies targeting the finance industry, particularly to address responsibility for the climate impacts of clients that banks finance or lend to. They suggest mandatory disclosure of fossil fuel financing by banks and more research to support policies that will align banks’ activities with the 2015 Paris Agreement, which aims to limit global warming to 1.5°C.

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