Banking on Climate Chaos 2023

Publication Date

April 12, 2023

Page Number

78

Link to Report

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Authors

Banking on Climate Chaos

The “Banking on Climate Chaos 2023” report, a comprehensive analysis of fossil fuel financing by top private banks, was collaboratively assembled by numerous civil society groups. Interestingly, the report unveils these banks’ significant investment in the fossil fuel industry. Over the seven years following the adoption of the Paris Agreement, the 60 largest private banks have astonishingly poured more than $5.5 trillion into the fossil fuel industry. In fact, in 2022 alone, their investment reached $673 billion.

In addition, the report discloses that the major players in 2022 were predominantly North American banks, with the Royal Bank of Canada taking the lead with a loan of $42.1 billion. This report also brings to light the issue of widespread greenwashing by banks and fossil fuel companies. Alarmingly, these entities have regressed on their climate commitments, a concerning trend duly highlighted in the report.

Furthermore, the report underscores that most of these banks, precisely 59 out of 60, do not possess policies robust enough to limit global warming below 1.5°C. This revelation underlines the urgent requirement for banks to revise their policies substantially. A pressing need exists to bridge the gap between the banks’ stated goals and actual practices.

Overview

BANK FOSSIL FUEL POLICIES: 2022 Trends

Highlights the need for more proactive exclusion policies to tackle the issues arising from fossil fuel financing. It urges banks to align their policies with the best practices for climate and human rights protections.

  1. Limited Progress: In 2022, there was slow progress in implementing new fossil fuel financing policies. Only a few banks adopted exclusion criteria for financing new oil and gas development projects, and even fewer had policies targeting coal expansion companies.
  2. Coal Policies: For instance, Barclays and Lloyds Banking Group adopted coal developer exclusion criteria for existing clients, while TD only added criteria for new clients. These actions were considered weak to moderate commitments.
  3. Regional Disparities: North American and Japanese banks made some policy updates but still lag behind their European counterparts regarding the stringency of their fossil fuel financing policies.
  4. Exemplary Cases: On the other hand. French bank Crédit Mutuel and La Banque Postale were highlighted for their robust coal policies, with La Banque Postale showing strong results by providing no financing to companies in the data set for 2022.

NET ZERO NETS NOTHING: Tracking Banks’ Commitments

Emphasizes the need to examine banks’ net zero commitments carefully. Ensuring these commitments are robust, transparent, and truly geared towards effectively combating climate change is crucial.

  1. Net Zero Commitments: Many banks have adopted net zero commitments as a key strategy to address the climate crisis. Of the 60 banks featured in the report, 49 have set net zero decarbonization targets within the last two years, either through initiatives like the Net-Zero Banking Alliance (NZBA) or independently.
  2. Net-Zero Banking Alliance: Over 125 banks have joined the NZBA, committing to reduce their financed emissions to net zero by 2050 in alignment with the Paris Agreement. However, there is a concern that some banks’ net zero targets may amount to greenwashing rather than meaningful action.
  3. Challenges with Net Zero Targets: The document highlights that banks’ net zero targets may be insufficient, fail to address controversial portfolios, and rely heavily on carbon offsets and technologies like Carbon Capture and Storage (CCS), which may not be effective in reducing emissions.

EQUITABLE AND JUST TRANSITIONS

Advocates for a people-centered, inclusive, and rights-based approach to transitioning from fossil fuels to a sustainable and equitable energy future.

  1. Leadership and Responsibility: Highlights the call from Pacific leaders for the Paris Agreement to limit global warming to 1.5°C and to halt the development and expansion of fossil fuel industries, starting with new coal mines. Pacific civil society urges global action for an urgent phaseout of fossil fuels and effective climate measures.
  2. Just Transition Principles: A transition from fossil fuels must be accompanied by a shift from an exploitative energy system to one that respects human rights and ensures equitable resource distribution. A just energy system should prioritize increasing energy access for all, creating new jobs in sustainable energy sectors, enhancing climate resilience, retraining affected workers, protecting the rights and income of communities during the transition, and engaging stakeholders democratically throughout the process.
  3. Gender and Indigenous Rights: Emphasizes the need to protect the rights of women and Indigenous Peoples, particularly in the context of climate, forest, and rights defenders. It calls for zero tolerance for violence against these groups and stresses the importance of their inclusion in decision-making processes during the energy transition.

FRONTLINE STORIES

Highlights the real-world implications of fossil fuel financing on vulnerable communities and the crucial role of grassroots movements in advocating for environmental justice and sustainable practices.

  1. Impact on Communities: Underscores how the impacts of fossil fuel financing are not abstract figures but have tangible effects on the lives of millions of people living in areas directly affected by fossil fuel extraction, processing, and transportation. It highlights the struggles of communities opposing fossil fuels on the ground and emphasizes the concrete impacts of bank financing on people worldwide.
  2. Vulnerable Communities: Frontline communities, including Indigenous Peoples, Black and brown communities, low-wage workers, and smallholder farmers, are often the first and most severely affected by climate change and the fossil fuel industry. These communities face worsening natural disasters, environmental degradation, and health risks exacerbated by racial injustice and inequality.
  3. Grassroots Resistance: Showcases how frontline communities are at the forefront of organizing and challenging powerful financial interests to advocate for environmental justice, protection of ancestral lands, prevention of pollution, creation of green jobs, and conservation efforts. It emphasizes the importance of following the lead of those most impacted by fossil fuel extraction in shaping a just and sustainable future.

INDIGENOUS PEOPLES’ SOVEREIGNTY, NOT FALSE SOLUTIONS

Underscores the importance of respecting Indigenous Peoples’ sovereignty, rejecting false solutions, and empowering communities to drive meaningful climate action towards a sustainable future.

  1. Indigenous Leadership: Advocates for Indigenous Peoples to lead climate change negotiations to prioritize Indigenous rights and sovereignty in climate action efforts. It emphasizes the importance of centering Indigenous perspectives and knowledge in addressing the climate crisis.
  2. Critique of False Solutions: Indigenous Environmental Network representatives critique mainstream climate change mitigation strategies as false solutions that do not lead to real emissions reductions. These false solutions are seen as threats to Indigenous sovereignty and territories.
  3. Call for Action: The essay calls for climate change mitigation efforts, to begin with keeping fossil fuels in the ground and to focus on empowering communities in the energy transition. It highlights the role of communities fighting against fossil fuel exploitation and leading the way towards a just transition.
  4. International Platforms: Discusses challenges Indigenous Peoples face in international forums like the UNFCCC and UNCBD, where their rights have been marginalized or constrained. It stresses the need to fully recognise Indigenous Peoples’ rights, self-government, and self-determination in climate negotiations.

METHODOLOGY

Outlines the approach taken to analyze and report on the financial activities of banks in the fossil fuel industry, emphasizing transparency, data accuracy, and the inclusion of frontline perspectives in assessing the impacts of fossil fuel financing.

  1. Fossil Fuel Industry Scope: The report’s methodology encompasses all aspects of the fossil fuel industry, including fossil fuel expansion, finance flows, and specific sectors such as coal mining, coal power, LNG, and various types of oil and gas extraction.
  2. Calculating Finance Flows: The methodology involves tracking and analyzing finance flows related to fossil fuel projects and transactions. It assigns credit to banks based on their involvement in financing activities that meet specific criteria, focusing on project finance transactions in sectors like LNG and coal power.
  3. League Tables: The methodology includes creating league tables that rank banks based on their financing activities in different sectors of the fossil fuel industry. These tables provide insights into banks’ involvement in financing fossil fuel expansion and extraction projects.
  4. From the Frontlines: The methodology also highlights stories and examples of communities and organizations resisting fossil fuel projects and advocating climate justice. These frontline stories provide real-world context to the data and analysis presented in the report.

FOSSIL FUEL EXPANSION

Sheds light on the significant role of leading companies in expanding fossil fuel activities. It emphasizes their considerable impact on global oil and gas expansion. Likewise, it underscores the profound implications of these activities for environmental sustainability and climate change mitigation efforts.

  1. Scope: delves into expanding fossil fuel activities by highlighting the top 100 companies involved in expanding fossil fuels. It specifically looks at companies engaged in upstream oil and gas activities, including those with significant resources under development or exploration capital expenditure.
  2. Top Companies: The report identifies the top 55 companies involved in short-term oil and gas expansion based on resources under development or field evaluation in 2022. Additionally, it highlights the top 32 companies based on exploration capital expenditure over a three-year average, focusing on their contributions to global oil and gas expansion.
  3. Global Impact: The 60 companies identified in the report are responsible for a significant portion of global short-term oil and gas expansion and capital expenditure on exploration. This underscores their substantial role in driving fossil fuel expansion and the associated environmental and climate impacts.
  4. Source: The data for identifying these top companies in fossil fuel expansion is drawn from the Global Oil & Gas Exit List compiled by Urgewald, providing a comprehensive overview of the key players driving the expansion of oil and gas activities globally.

FROM THE FRONTLINES: Holding the line Against Methane Gas Import and Export

In response to recent geopolitical events, there has been a rapid expansion of LNG infrastructure. This situation provides valuable insights, particularly highlighting the risks and challenges of transitioning towards a more sustainable energy future.

  1. Context: Contextualizes the global energy market pressure following the Russian invasion of Ukraine in February 2022, which led to the urgent need to replace Russian oil and gas. This situation prompted the fast-tracking of liquefied natural gas (LNG) projects and their financing by industry, government, and banks.
  2. LNG Terminals: Developers revived numerous proposals for LNG export terminals in regions like North America, Qatar, Africa, and Australia, as well as import terminals in Europe and Asia. The rush to establish these terminals was driven by the perceived necessity for “energy security” amidst geopolitical tensions and market uncertainties.
  3. Global Infrastructure: According to the Global Energy Monitor’s Global Gas Infrastructure Tracker, over 170 liquefaction and regasification terminals are currently operational worldwide, with an equal number in the proposal stage.
  4. Risks and Concerns: Underscores the risks associated with depending on a volatile global market for fossil gas imports, especially in light of geopolitical conflicts and market fluctuations. It raises concerns about the environmental and social impacts of expanding LNG infrastructure and the implications for climate change mitigation efforts.

COAL MINING & POWER

Underscores the critical role of coal in global CO2 emissions, highlighting the financing trends supporting coal expansion. Furthermore, it brings to light the environmental challenges of coal mining and power generation. Hence, with an emphasis on transitioning from coal to cleaner and more sustainable energy alternatives, it addresses the urgent need to tackle climate change and environmental degradation.

  1. Importance of Coal: It is the largest energy-related global carbon dioxide (CO2) emissions source, accounting for 15 gigatonnes (Gt) in 2021. It is also noted as the primary source of electricity generation, particularly in Asia.
  2. Emissions Impact: Emphasizes the significant role of coal in contributing to global CO2 emissions and its implications for climate change. It underscores the urgent need for substantial reductions in coal-related emissions to mitigate the severe impacts of climate change.
  3. Financing Trends: The document discusses the financing activities related to coal mining and coal power, pointing out that Chinese banks provided a substantial portion of financing to the world’s top companies in these sectors. The financing trends indicate ongoing support for coal expansion despite global efforts to transition to cleaner energy sources.
  4. Environmental Concerns: Raises concerns about the environmental consequences of coal mining and coal power generation, highlighting the need to address the harmful impacts on air quality, water resources, and local ecosystems associated with coal extraction and combustion.

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