Banks finance climate chaos and subsidize fossil fuels

Banks finance climate chaos and support fossil fuels

In the year 2024, in which the highest average temperature ever was recorded, and global warming levels exceeded the limit stipulated in the Paris Agreement; It was expected that the pace of climate commitment would increase, especially on the part of institutions that had previously pledged to support the transition towards clean energy, led by banks.

However, what happened was completely contrary to what climate responsibility requires. A recent report discussed by the Wall Street Journal website (The Wall Street Journal) revealed that global banks financed fossil fuels by about $900 billion during that year, a sharp increase of 23% compared to 2023, according to what was stated in the 16th edition of the “Banking on Climate Chaos” report, issued by a coalition of environmental organizations, in a move that represented… It has seriously retreated from its climate pledges, and portends new decades of dependence on the most polluting energy sources.

This sharp contradiction reveals the failure of banks to translate their environmental pledges into concrete actions. Which makes international commitments lose their credibility, and makes it more difficult to achieve the Sustainable Development Goals (SDGs), especially Goal No. (13) “Climate Action,” which stipulates the necessity of taking urgent measures to combat climate change and its effects.

Massive financing for fossil fuels

What is notable in this report is that the financing provided by these banks is not limited to financing a specific project only, but rather includes all forms of financial support provided by 65 of the largest global banks to approximately 2,730 companies active in various stages of the fossil fuel chain, from exploration to burning, as financing covers multiple forms, such as issuing bonds and shares, direct loans, corporate loans, and revolving credit facilities.

This comprehensive financial expansion enables fossil fuel companies to strengthen their infrastructure, develop new projects, and expand their operations at a time when scientific estimates from organizations such as the International Energy Agency (IEA) are unanimous that any new expansion of fossil fuels is in direct conflict with the goal of limiting global warming.

Accordingly, such financing does not merely represent strategic mistakes, but rather they are decisions that undermine the global environmental path, and contradict goals such as Goal No. (7) “Clean and Affordable Energy,” which calls for expanding the use of renewable energy and reducing dependence on fossil sources.

US banks top the list of financiers of pollution

It was not surprising that American banks were at the top of the blacklist; (JPMorgan Chase) came in first place with financing of $53.5 billion, followed by (Bank of America) with $46 billion, then (Citigroup) with $44.7 billion. As for the European level, (Barclays) was the only bank that appeared among the first 12 places on that list.

This concentration is a dangerous indicator. Because nearly half of the financing went to American fossil fuel companies, which are among the largest producers of oil, gas, and methane in the world, and these numbers show that the major banks not only did not reduce their financing of fossil fuels, but also steadily increased their level of support. The increase in JPMorgan, Citigroup, Bank of America, and Barclays exceeded $10 billion in one year.

This generous financial support, in light of the worsening climate disasters, can only be seen as an acceleration of the pace of climate chaos, and an obstacle to Goal (12) of the Sustainable Development Goals (SDGs) “Responsible Consumption and Production,” as continued support for fossil fuels leads to a polluting production cycle that perpetuates resource depletion and exacerbates emissions.

Withdrawing from climate commitments

What makes the picture even darker is that some major banks not only increased financing, but also withdrew from the climate alliances in which they were a founding member, such as the United Nations’ Net-Net Zero Emissions Alliance (Net-Zero Banking Alliance). These withdrawals came in a shifting political context within the United States, with the rise of anti-climate rhetoric, and accusations from some lawmakers that environmental cooperation between banks may be a form of A form of “conspiracy against American industries.”

This shows the fragility of voluntary commitments, and confirms the necessity of binding laws and legislation that force banks to adhere to emissions reduction paths, so that they do not remain hostage to political fluctuations or market pressures. This is what makes it necessary to have legal frameworks and binding legislation that force the financial sector to adopt clear and measurable climate paths, far from manipulating numbers or circumventing policies.

Where did the promises of sustainability go?

Despite some banks adopting green policies in which they announce the cessation of financing coal projects or drilling in sensitive areas, the report reveals systematic circumvention methods, most notably the continued provision of public loans to companies that manage fossil fuel projects, which opens the door to billions of dollars in indirect financing.

These practices indicate that some banks rely on a dual language; It declares its support for clean energy on the one hand, while it secretly finances the expansion of polluting projects on the other hand. These contradictions not only affect the credibility of the financial sector, but also threaten Goal No. (16) of the Sustainable Development Goals (SDGs): “Peace, justice and strong institutions.” Because the absence of transparency and proper governance leads to the spread of unethical practices.

Expert Warnings

In light of this systematic financial manipulation, experts’ voices are rising, warning of the repercussions of banks continuing to finance fossil fuels without restrictions. Ben Caldecott, director of the Sustainable Finance Group at the University of Oxford, confirmed that the problem does not lie in the principle of financing itself, but rather in the absence of real commitment by banks to transition plans towards clean energy, and he warned that “huge amounts of financing are granted to companies that do not originally intend to reduce their emissions, but rather plan to increase them,” in clear disregard for the reality of climate change, and a dangerous departure from the Sustainable Development Goals (SDGs).

For her part, Lucy Pinson, Executive Director of Reclaim Finance, explained that one of the main reasons for the increase in the volume of financing in 2024 was the decline in interest rates, and this made borrowing more attractive to fossil fuel companies, even if this entailed environmental risks that conflict with the goals of sustainable development.

Allison Fajans-Turner, Policy Officer, Rainforest Action Network; She summed up the bleak scene by saying: “Without binding regulation, financing climate chaos will remain the primary strategy for banks; Which will destroy our economy and our planet at the same time.”

These warnings are an alarm bell that requires policy makers to move urgently towards establishing real controls that ensure that global capital is directed towards the right path, in a way that serves climate justice and supports the implementation of Sustainable Development Goals (SDGs), especially those related to climate, clean energy, and strong institutions. The world cannot tolerate more loose promises, but rather needs a concrete and organized commitment that will save what remains of the Earth’s balance.

In light of these facts, the continued financing of fossil fuels by global banks is a systemic threat to the climate and a direct undermining of international efforts to protect the planet. From this standpoint,Earth Guards stresses that continuing this financial approach expresses a failure to adapt to the requirements of the stage, and contradicts the essence of the declared commitments towards sustainability. Therefore, it calls for redirecting investments towards clean energy projects, which have become a strategic necessity to reset the global financial path in line with the Sustainable Development Goals (SDGs).