Triple Bottom Tuesday>>> Have Major Banks Two-Timed Pledging Net Zero?
Picture Credit: Dexter Fernandes
With climate change breathing down our necks, there has been a plethora of actions taken in order to minimise emissions so far. Global emissions have shown the largest decline of 5.8% in 2020 since the 2009 decline- the decline that followed the global financial crisis- and almost five times greater. 27 of the world’s largest banks have decreased their financing of fossil fuels.
Unfortunately we have individuals and organisations on the other end of the scale who prefer to value profit even if the planet and its inhabitants are at risk. In 2015 with the Paris agreement, there were many banks which pledged to not invest any money in fossil fuel-based projects. However by the time it was 2020, some of the top banks who invested in fossil fuel-based projects invested more than four trillion dollars into the fossil fuel industry despite signing the Paris agreement
The sad truth is, despite all the efforts for the contrary, after the encouraging fall in 2019 and 2020, global power generation from coal hitched by approximately 9% in 2021 according to IEA’s ‘coal 2021’ report. It has been forecasted by the IEA’s annual market report released in December 2021 that coal production will reach an all time high in 2022.
Picture Credit: Jonathan Kemper
Coal is the most carbon-intensive fossil fuel when it comes to emissions and therefore it is the most decisive target in need of transition into renewable alternatives. Reducing coal usage is a key part of global efforts to slash climate change, greenhouse gases and bringing emissions down to “net zero” by the middle of this century.
The coal sector is responsible for nearly half of the global greenhouse gas emissions. Coal combustion produced 13.97 billion metric tons of carbon dioxide worldwide just in 2020.
According to research, 33 out of 60 of the world’s largest banks have increased their financing in the fossil fuel sector. Within five years after the Paris agreement was signed, there has been $3.8 trillion financed in fossil fuels by some of those banks. Several campaigns have come to existence, be it to discourage or to verbally bash financial institutions such as these. Campaign groups Urgewald and Reclaim Finance, alongside dozens of other NGOs , have dug out that commercial banks have channeled roughly $1.5 trillion to the coal industry between the start of 2019 and November last year.
“Banks like to argue that they want to help their coal clients’ transition, but the reality is that almost none of these companies are transitioning”, “and they have little incentive to do so, as long as bankers continue writing them bank checks”, says Katrin Gaswind, head of Financial research at German environment group Urgewald.
Picture Credit: Bart van Dijk
Studies show that banks from six countries were responsible for 80% of global coal financing over the period, the countries being- China, Canada, U.S, Japan, U.K and India. $1.2 trillion was channeled to coal firms via underwriting, and it turns out that all the top 10 underwriters were Chinese. Direct loans amounting to $363 billion were provided by 376 commercial banks in favour of the coal sector. Within those 376 commercial banks were two popular Japanese banks, identified as two of the biggest lenders, both being members of Net Zero Banking Alliance.
Just 12 large banks accounted for 48% of the total lending to companies on the GCEL (a list consisting of 1032 companies that amount to 90% of world’s thermal coal production and coal-fired capacity). What’s more shocking is, out of those 12, 10 are members of the U.N’s Net Zero Banking Alliance.
With studies warning to the possibility of widespread, rapid and intensified global warming, is this behaviour from some of the world’s biggest financial institutions, acceptable? Experts wonder how long it would be till banks use their most powerful tools, like loan eligibility and rates to incentivise clients, alongside pulling overall funding to the fossil fuel industry.
February 22nd 2022 | 5:45 PM