The level of extreme fossil fuel financing by banks fell by 22% in 2016, but many banks are still increasing their lending to destructive sectors.
New data shows that banks ploughed US$87bn into “extreme oil” (such as Arctic drilling, tar sands and ultra-deep offshore oil), coal mining, coal power and LNG export last year. This is down from US$111bn in 2015.
However, in the three years to 2016, US$290bn was directly and indirectly funnelled into these sectors, despite many banks saying they will adopt the standards of the Paris Agreement.
The Banking On Climate Change 2017 report, compiled by a group of NGOs that monitor financial activity, found that the portfolios of Chinese and Japanese banks are overall most destructive for the climate.
The authors gave each of the 37 banks it tracked a grade, considering its funding for those aforementioned fossil fuel sectors. All the Chinese banks monitored (Agricultural Bank of China, Bank of China, China Construction Bank, ICBC) received the lowest grade (F) across the board. The same applies for the three Japanese banks graded (Mizuho, MUFG, SMBC).
A number of western banks also received the worst possible score-cards. These are: Commonwealth Bank of Australia, National Australia Bank, Canadian Imperial Bank of Commerce (CIBC) and Scotiabank. It’s no surprise that these banks are based in countries with high amounts of fossil fuel reserves (Australia and Canada).
Overall, 12 of the 37 banks actually increased their financing of extreme fossil fuels in the two years after the Paris Agreement on climate was agreed. These are: ANZ, Bank of America Merrill Lynch, Bank of Montreal, Barclays, China Construction Bank, Citi, JP Morgan, Mizuho, Santander, Toronto-Dominion Bank, UBS and UniCredit.
The news that more than one-fifth of funding for these sectors has fallen off last year is a cause for celebration. However, the persistent failure of some banks to come in line with international standards is worrying.
Banks often talk about the reputational risk and how that can be converted into real financial penalties for those that finance toxic assets and projects. However, the bottom line seems to override these concerns in many cases of fossil fuel financing.
Many have stepped away from new coal financings: in the past year or two we’ve seen the likes of JP Morgan, ING and Commerzbank announce an end to the direct financing of new coal projects. But there is no such initiative underway for oil or LNG financing, nor does the same sort of lobby appear to exist.
The environmental implications of funding extreme oil projects, for instance, is great. Last year, for example, oil sands were found to be the biggest source of air pollution in North America. Yet banks such as the Royal Bank of Canada (US$12.93bn), CIBC (US$5.45bn), HSBC (US$3.41bn), Bank of Montreal (US$3.33bn) and JP Morgan (US$3.15bn) have lent colossal sums into the sector since 2014.
The table below shows the spread of funding across these extreme fossil fuel sectors from 2014 to 2016. You can read the full report on fossil fuel financing here.