“Energy pragmatism” has become a mantra in a time of high oil prices and wars in Ukraine and Gaza. Emboldened fossil fuel producers are orchestrating megamergers and doubling down on oil and gas production.
Their enablers: global bankers.
The world’s largest banks extended some $706 billion of oil, gas and coal finance last year, even as planet Earth notched its warmest 12 months since global record-keeping began in 1850.
JPMorgan Chase boosted its fossil fuel financing by $2 billion, to just under $41 billion for the year, making it once again the largest fossil fuel funder, according to Rainforest Action Network’s latest Banking on Climate Chaos report released today.
Japan’s Mizuho shot up four notches to second place, with $37 billion. Bank of America, which leads in extracting in the Amazon biome, increased financing by almost $4 billion to land third, at nearly $34 billion.
Truist Financial, ScotiaBank and PNC lead smaller banks in financing calculated as a percentage of their assets.
Overall fossil fuel financing by the world’s 60 largest banks has trended down in recent years, from $891 billion in 2016 to last year’s $706 billion. But that’s nowhere near the rate needed to keep global warming in check. In the eight years since adoption of the Paris Agreement to limit global temperature increases to 1.5 degrees Celsius, banks have extended $6.9 trillion to fossil fuel companies.
The carbon industry’s top backers over that timespan are all US-based: JPMorgan, with a whopping $431 billion, followed by Citigroup and Bank of America.
“Major banks have squandered yet another year to take decisive and ambitious action on climate,” said report co-author Adele Shraiman, a senior strategist for the Sierra Club’s Fossil-Free Finance campaign.
Banking backtrack
The UN Intergovernmental Panel on Climate Change has said that greenhouse gas emissions need to be cut by 43% from 2019 levels by the end of the decade. Instead, emissions have been rising. Coal, oil and gas account for more than three-quarters of global greenhouse gas emissions and nearly 90% of CO2 emissions.
Last year’s COP 28 agreement, forged in the oil-rich United Arab Emirates, called for “transitioning away from fossil fuels in energy systems,” the first explicit mention of fossil fuels at a global conference of parties. Yet the ambiguous language (how quickly? And what of gas-powered cars and trucks or petroleum-based plastics?) left an opening for oil and gas producers to argue for a continued role.
Meanwhile, banks and asset management firms are retreating from their climate pledges amid a conservative-led backlash against environmental, social and governance principles (not to mention surging oil and gas profits).
Subpoenas issued last year by the GOP-led House Judiciary Committee to climate action groups including As You Sow, Ceres, and the Glasgow Financial Alliance for Net Zero, have sent some corporate and financial members packing. JPMorgan Chase exited Climate Action 100+, a shareholder group focused on engaging top emissions emitters that was named in the subpoenas.
The bank, along with peers Citi, Bank of America and Wells Fargo, have abandoned the Equator Principles, which sets standards to minimize risks to the environment and local communities impacted by fossil fuel and mining projects. Bank of America has backtracked on a policy to curtail funding for coal and Arctic drilling projects.
Shareholders are pushing back against the pushback. New York City Comptroller Brad Lander is pressing for a “Clean Energy Supply Financing Ratio,” which shows the proportion of total bank financing going to clean and low-carbon energy versus fossil fuel projects.
So far, JPMorgan and Citi committed to disclose this ratio. Citi, for example, invests just 60 cents in renewables and low-carbon energy for every dollar of fossil fuels it finances, a ratio of .06:1. To cut emissions in half by 2030, as the Paris goals require, the current ratio should be 4:1, according to the International Energy Agency.
Peak fossil fuels
The latest Banking on Climate Chaos report uses a new methodology that incorporates multiple data sources and credits a wider range of deal participants. It updates prior figures for overall financing and expansion, but not for individual carbon fuels. What was originally reported as $669 billion in total fossil fuel financing in 2022 is now $778 billion — more than 16% higher, meaning last year’s financing levels dropped.
“The trend of decreased financing from traditional banks to fossil fuel companies is good news, tempered by the reality that financing for fossil fuel expansion should be zero,” the report said. The decline, it added, “may not be permanent” as “broader macroeconomic and geopolitical factors are likely impacting corporate finance and the capital seeking practices of fossil fuel companies.”
Still, as electric vehicles and renewable energy reach critical mass, the long-term outlook for fossil fuels is dim. Renewables hit 30% of global supply last year, which research firm Ember said signaled “a new era of falling fossil generation.” The IEA projects that fossil fuel demand will peak by the end of the decade.
Last year’s dollar flows reveal major shifts:
Methane and coal surge
Liquid natural gas exports are booming, especially from the US. Such “midstream” processors and pipeline companies were the biggest borrowers last year, taking in $121 billion to finance their operations, up from $116 billion in 2022. Enbridge, with projects across the US and Canada, grabbed $35 billion. The enabling bankers: Mizuho, Mitsubishi, Santander, RBC, and Morgan Stanley.
More than 200 thermal coal mining companies, including some new operations, received $42.5 billion in financing (comparisons with last year are difficult with the methodology change). More than 80% of financing came from China CITIC Bank and other Chinese banks.
Fracking and deep water
The booming fracking business was bankrolled primarily by JPMorgan, Wells Fargo, Bank of America, Goldman Sachs, Citigroup and Morgan Stanley, to the tune of $59 billion. New well drillings are outpacing fracking activity, creating what the industry calls a “fracklog.”
Ultra deepwater oil and gas projects, where MUFG, Mizuho and SMBC Group dominate, garnered $3.7 billion. Analysts project ultra deepwater extraction to surge through 2030.
