Over $700 Billion in Fossil Fuel Financing: Banks Under Fire

Over $700 billion in loans and underwriting flowed into companies conducting business in fossil fuels last year, funneled by 60 of the world’s largest private banks, according to a report released Monday by several environmental groups.

The annual report, compiled by the Sierra Club, the Rainforest Action Network, and other organizations, shows a slight decline in banks’ financing for oil, gas, and coal since 2021. However, researchers argue that this reduction is not happening quickly enough to meet climate goals.

Environmental activists have long sought to pressure the financial backbone of the fossil fuel industry to accelerate the transition to clean energy. Climate advocates have found some success in recent years as ESG (environmental, social, and governance) principles have begun to influence business strategies for many major financial institutions.

Despite these efforts, Monday’s report highlights how global banks continue to finance new and existing fossil fuel endeavors. Since 2016, when the Paris Agreement was ratified, banks have financed fossil fuel interests with an estimated $7 trillion.

Top Fossil Fuel Financiers

The report identified JPMorgan Chase as the top financier of fossil fuels for three consecutive years, with commitments increasing from an estimated $38.7 billion in 2022 to $40.8 billion in 2023. “JPMorgan has made a number of moves to try to strengthen their climate commitments,” said April Merleaux, a research manager with the Rainforest Action Network. “But the practices and policies they’re implementing do not move fast enough to recognize the urgency of this moment.”

Some banks questioned the methodologies used in the report, expressing concerns about data accuracy and how transactions were categorized as related to fossil fuels. In a statement to NBC News, a JPMorgan Chase spokesperson said the company’s own data “reflects our activities more comprehensively than estimates by third parties” and emphasized its commitment to “zero-carbon power.”

Methodological Concerns

Satyajit Bose, a professor in sustainability management at Columbia University, said the study’s methodology was reasonable overall but noted some issues. For instance, the authors counted sustainability-linked bonds as fossil-fuel-related if the company receiving the bonds worked in the fossil fuel industry. Bose also expressed concerns about categorizing refinanced loans as repeated loans, which could be misleading.

Following JPMorgan Chase, Tokyo-based Mizuho Financial Group and Bank of America were highlighted as major fossil fuel financiers. Mizuho has increased its fossil fuel financing to over $37 billion, with significant investments in methane gas projects. The report noted that the energy crisis in Europe, exacerbated by Russia’s invasion of Ukraine, contributed to global financing of gas last year.

Bank of America ranked third with nearly $34 billion in financial commitments to fossil fuel companies. A spokesperson for Bank of America noted that the bank funds low-carbon and fossil fuel energy companies in equal measure and emphasized its commitment to transitioning to a low-carbon economy.

Advocacy and Protests

Advocacy groups are planning an active summer of protests on Wall Street to pressure banks to cease financing fossil fuel interests. The “Summer of Heat,” organized by groups like Climate Defenders and Planet Over Profit, began in April with protests targeting Citigroup. According to the new report, Citigroup has supplied fossil fuel interests with almost $400 billion since 2016, though its commitments have declined since 2019.

Citigroup stated its commitment to transitioning to a low-carbon economy, noting that since 2020, it has allocated over $400 billion toward its goal of investing $1 trillion in sustainable finance by 2030. The group also aims to achieve net-zero carbon emissions for its operations by 2030.

Upcoming protests will continue to focus on Citigroup, with climate action organizers emphasizing the need for Wall Street banks to divest from fossil fuels. “Citi is one of the biggest funders that we believe we can move,” said Jonathan Westin, an organizer at Climate Defenders. “We’re trying to send a message to Wall Street banks that they need to get off of fossil fuels and make real plans to exit financing pipelines, natural gas facilities, and oil rigs across the globe.”

The Broader Impact

The ongoing financial support for fossil fuel companies underscores the challenges faced by the global community in addressing climate change. While some progress has been made in incorporating ESG principles into business strategies, the substantial funding still directed toward fossil fuels highlights the need for more aggressive and immediate action. The report serves as a call to action for financial institutions to reevaluate their investments and align more closely with global climate goals, ensuring a sustainable future for all.