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March 28, 2022

Banks undermine own net zero targets

Many financial institutions have set ambitious net zero targets, yet continue to finance fossil fuel production and lobby to weaken sustainable finance policy, according to study.

The world’s 30 largest listed financial institutions are undermining their net zero goals by continuing to fund fossil fuel expansion and lobbying to weaken emerging sustainable finance policy, according to a new report by climate think-tank InfluenceMap.

All but one of the reported institutions have signed up to the Glasgow Financial Alliance for Net Zero, which commits them to set substantial 2030 decarbonisation targets and achieve net zero by 2050. 

However, these financial institutions have been reluctant to introduce meaningful fossil fuel exclusion policies and enabled at least $740bn of financing for the fossil fuel production sector during the past two years.

InfluenceMap senior analyst and report author Eden Coates said: “These global financial institutions have significant economic and political influence, and they are delaying action that is essential to respond to the climate crisis.”

She continued: “There is a stark disconnect between what they say about climate change and what they’re actually doing, particularly when it comes to pushing back on policymakers’ attempts to align financial regulation with climate goals.”

Net zero targets

GFANZ commitments align with science-based guidance from the Intergovernmental Panel on Climate Change and the International Energy Agency, which have both stated that a rapid phase-out of fossil fuel exploration and production is essential to limiting global warming.

Eleven institutions that have signed up to the Alliance have already set concrete 2030 climate targets across multiple sectors. For example, JPMorgan, Goldman Sachs, Lloyds Banking Group, and Morgan Stanley have made targets for automotive manufacturing, oil and gas, and power; and Barclays has targets on energy, power, steel and cement.

In response to the InfluenceMap report, a Barclays spokesperson stressed the company’s part in addressing the urgent and complex challenge of climate change: “In March 2020 we were one of the first banks to set an ambition to become net zero by 2050, across all of our direct and indirect emissions, and we committed to align all of our financing activities with the goals and timelines of the Paris Agreement.” 

The bank said it has a three-part strategy, consisting of achieving net zero ambitions, reducing its financed emissions, and financing the transition. 

It said: “In practice, this means we have set 2030 targets to reduce our financed emissions in four of the highest emitting sectors in our financing portfolio, with additional 2025 targets for the two highest-emitting sectors – energy and power. We have also provided over £60bn of green financing and we are investing our own capital – £175mn – into innovative, green start-ups.”

So do these institutions’ actions really match up to their commitments? 

Financing fossil fuels

Collectively, these 30 financial firms facilitated at least $740bn in primary financing to the fossil fuel value chain in 2020-21, which accounts for 7 per cent of their total primary financing in this period, largely through corporate lending and bond underwriting, according to InfluenceMap.

This comprised at least $697bn for oil and gas production, including $145bn to five of the largest listed oil and gas companies – ExxonMobil, Chevron, Shell, TotalEnergies and BP – all of which plan to continue exploration and development. The remaining $42bn facilitated coal production, including $17.5bn cumulatively provided to Glencore by 21 of the reported institutions.

JPMorgan was the biggest fossil fuel financier, with $81bn in 2020-21, followed by Citigroup with $69bn and Bank of America with $55bn. Despite setting a 2030 target to reduce power sector emissions, JPMorgan increased its financing of coal production from $1.28bn in 2020 to $3.08bn in 2021. 

In response to the InfluenceMap report, JPMorgan told Sustainable Views: “In 2021, we facilitated more than $100bn for green activities like renewable energy, energy efficiency and sustainable transportation, doubled our green investment banking activity and were the largest underwriter of green bonds.” 

It added: “These efforts help put us well on our way to our target of $1tn for green initiatives over 10 years. We are also taking pragmatic steps to meet our 2030 emission reduction targets in oil and gas, electric power and automotive manufacturing, while helping the world meet its energy needs securely and affordably.”

Lobbying groups

However, the report reveals that all 30 institutions remain members of industry associations that have consistently lobbied to weaken key sustainable finance policies in the EU, the UK and the US that would require transparency around the financing of environmentally harmful activities, including fossil fuels. 

Half of the 30 financial institutions reported are also members of real-economy industry associations that lobby directly in line with fossil fuel interests, including the US Chamber of Commerce and the American Gas Association.

For instance, in 2021, the Biden administration proposed a bold climate policy and fiscal spending agenda, which ultimately failed following extensive lobbying. The original $3.5bn ‘Build Back Better’ reconciliation bill was later trimmed to $1.75tn (including a $555bn allocation for climate action), following opposition by a number of US industry associations, including the US Chamber of Commerce, which strategically deployed their policy influence against the bill. 

Ultimately, several important elements, including clean energy incentives, a clean energy performance programme and a methane fee, were scaled back or scrapped.

At least nine of the 30 financial institutions (Bank of America, Barclays, BlackRock, Citi, Credit Suisse, JPMorgan, Morgan Stanley, TD Bank Group and Wells Fargo) are members of the US Chamber of Commerce. 

Despite an increase in long-term climate targets and voluntary climate-related reporting, these companies continue to show a significant lack of meaningful short-term action in the face of the climate crisis, as evidenced by membership of industry associations opposed to policymakers’ attempts to implement sustainable finance policies, thinks InfluenceMap. 

Coates concludes: “If they are serious about achieving their net zero targets, they should set concrete and actionable short-term targets across all aspects of their operations.”


A service from the Financial Times