Financial institutions

The world’s largest financial institutions are undermining their own net zero targets

Corporations Provide $740 Billion For Fossil Fuel Generation, Push To Weak Sustainable Finance Policy

According to new analysis released today by climate think tank InfluenceMap, the world’s 30 largest listed financial institutions are jeopardizing their net zero goals by continuing to fund fossil fuel expansion and lobbying to weaken climate change policy. emerging sustainable financing.

The report shows that despite a significant increase in its public support for climate action, the financial sector is reluctant to introduce meaningful fossil fuel exclusion policies and has enabled at least $740 billion in financing for the finance sector. fossil fuel production in the past two years.

Eden Coates, InfluenceMap Principal Analyst and author of the report, said: “These global financial institutions have considerable economic and political influence, and they are delaying actions that are essential to address the climate crisis.

“There is a glaring disconnect between what they say about climate change and what they actually do, especially when it comes to pushing back against policymakers’ attempts to align financial regulation with climate goals. .

“If they are serious about achieving their net zero goals, they need to set concrete, achievable short-term goals in all aspects of their operations.”

The 30 financial institutions include 27 with banking branches, 25 with asset management activities and two global insurers. The report examines their corporate lending, equity and bond underwriting and asset management activities in 2020 and 2021 and how these activities align with their climate reporting, policies and commitments. It also examines their lobbying on sustainable climate and financial policy, directly and indirectly through trade associations.

Zero net commitments without action

All except China Ping a group have subscribed to the Glasgow Financial Alliance for Net Zero (GFANZ), which commits them to setting substantial decarbonization targets for 2030 and reaching net zero by 2050. This is in line with scientific guidance from the Intergovernmental Panel on Climate Change (IPCC) and the International Energy Agency (IEA) who have both said that a rapid phase-out of fossil fuel exploration and production is essential to limit global warming.

However, only 11 financial institutions have set concrete climate targets for 2030 in multiple sectors.

By contrast, the report finds that the 30 remain members of industry associations that have consistently lobbied to weaken key sustainable finance policies in the EU, UK and US that would demand transparency around funding environmentally harmful activities, including fossil fuels. Only a few, especially BNP Paribas, AXA and Allianzmake a positive commitment to sustainable finance.

Additionally, half (15) are members of real-economy industry associations that are “key climate change action blockers”, lobbying directly in line with fossil fuel interests, including the United States Chamber of Commerce and the American Gas Association.

Arms banking provides hundreds of billions to fund fossil fuel production

The report finds that the financial institutions ‘remain reluctant to introduce meaningful fossil fuel exclusion policies’ and their banking and asset management arms remain very active in coal, oil and gas financing.

Their banking branches have cumulatively facilitated at least $740 billion in primary financing of the fossil fuel value chain in 2020 and 2021 – 7% of their total primary funding over that period – primarily through corporate lending and bond underwriting. This was composed of:

  • At least $697 billion for oil and gas production (including $145 billion for five of the largest listed oil and gas companies, ExxonMobil, Chevron, Shell, TotalEnergies and BPall of which plan to continue exploration and development).
  • $42 billion for coal production, including a cumulative $17.5 billion for glencore by 21 of the 27 institutions with banking activities.

JP Morgan was the largest catalyst for fossil fuel financing with $81 billion in 2020-21, followed by Citigroup with $69 billion and Bank of America with $55 billion. Despite the setting of a target for reducing emissions from the electricity sector by 2030, JP Morgan increased its coal production funding from $1.28 billion in 2020 to $3.08 billion in 2021.

Only seven financial institutions have plans to exit thermal coal in accordance with IPCC guidelines 1.5°C, and only four (Barclays, BNP Paribas, ING and Societe Generale) have pledged to reduce their exposure to oil and gas by 2025. However, some of these policies contain loopholes that allow fossil fuel financing to continue under certain circumstances.

Asset management firms underinvest in low-carbon technologies

Although 22 of the 25 asset management firms of financial institutions participate in the Climate Action 100+ (CA100+), many do not seem to actively encourage companies to align their business models with the goals of the Paris Agreement. CA100+ signatories Santander and TD Bank Groupin particular, score low on stewardship.

In all institutions with asset management services, the report finds that their equity portfolios are heavily overweight in companies that are not moving from brown to green tech fast enough to be aligned with a target of 1.5°C. Five years from now, the companies they invest in will have on average:

  • produce 50% too much coal and 12% too much oil;
  • hold 18% excess coal capacity and 60% excess renewable energy capacity;
  • produce 55% too many internal combustion engine vehicles and only 25% of the electric vehicles needed.

Cumulatively, their asset management arms hold at least $222 billion of investments in the fossil fuel value chain, including $179 billion in oil and gas production and $43 billion in coal mining. This represents 5% of their total equity holdings.

Lloyd’s banking group has the largest equity exposure to fossil fuel production at 17%, followed by Bradesco Bank (13%) and Itau Unibanco (12%).