Cost of renewables

Bank financing for low carbon energy has stalled since 2016

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Just seven per cent of financing for energy companies from major global banks went to fund renewable projects between 2016 and 2022, a study has found.

The data, produced for Sierra Club, Fair Finance International, BankTrack and Rainforest Action Network, indicates major failings by financial institutions to help meet global commitments on net zero emissions by 2050.

This is despite that fact that many of them are part of the UN-convened Net-Zero Banking Alliance which commits to aligning their lending and investment portfolios with net-zero emissions by 2050.

According to the industry-led Glasgow Financial Alliance for Net Zero (GFANZ), low-carbon energy investments need to account for at least 80 per cent of energy investments compared to fossil fuels (4:1) by 2030 to reach climate goals.

“Many banks claim that they continue to provide financing for fossil-fuel clients in order to help those clients in their climate transition,” said Adele Shraiman, campaign representative with the Sierra Club’s Fossil-Free Finance campaign.

“This data calls into question that claim, and gives proof that banks must get serious about financing the clean energy transition.

“In order to reach the goals of the Paris Agreement, we know that investments in renewable energy must dramatically increase this decade. Banks must take bigger strides to scale up their financing for renewable energy and phase out their financing for fossil fuels – and fast.”

According to the research, no bank looks set to reach the minimum climate requirements.

At $181bn, Citi and JP Morgan Chase each pumped the most into the energy companies examined between 2016 and 2022 but just 2 per cent went to renewables.

Similarly, only 2 per cent of Barclays’ financing of the energy companies examined went to renewables. Royal Bank of Canada is at just 1 per cent, Mizuho 4 per cent and HSBC 5 per cent. The figure stands at 7 per cent for French bank BNP Paribas.

The researcher showed that total financing from the banks rose to a high of $34.6bn in 2021, from $23.2bn in 2016, but the amount going to fossil fuels increased too, keeping renewables' share broadly the same.

The data reveals that banks that are members of GFANZ actually provide less financing for renewable energy, on average, than their counterparts that are not in the alliance.

This is despite the fact that leaders of the industry-led group, which is committed to accelerating the energy transition by the finance sector, are vocal about the need for funding for low-carbon energy to be four times that of dirtier energy like coal, oil, and gas, by the end of this decade.

According to Sierra Club, when asked this week whether Citi had ever refused to fund new fossil-fuel projects, CEO Jane Fraser said: “We need to have energy security and we need to be operating on cleaner technologies and the two, as we are seeing right now, cannot be mutually exclusive.”

But today’s data shows that Citi continues to prioritise fossil-fuel proliferation over clean technologies.

In December, a ShareAction report looking into Europe’s top 25 banks found that lack of transparency in their financing operations could be leading to an under-reporting of their support for high-carbon sectors.

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