World's Banks Have Given $2.7 Trillion to Fossil Fuels Since Paris Agreement Begun, Study Shows
Financial companies are increasingly being recognized — by their clients, shareholders, regulators, and the general public — as climate actors, with a responsibility to mitigate their climate impact. For the banks highlighted in this report, the last year has brought a groundswell of activism demanding banks cut their fossil fuel financing, at the same time that increasingly extreme weather events have further underscored the urgency of the climate crisis. Nevertheless, the report reveals that the business practices of the world's major private-sector banks continue to drive us toward climate disaster.
Adding up lending and underwriting from 35 private-sector banks to the fossil fuel industry, this report finds that Canadian, Chinese, European, Japanese, and U.S. banks have financed fossil fuels with $2.7 trillion since the Paris agreement was adopted (2016-2019), with financing on the rise each year. The report finds that fossil fuel financing continues to be dominated by the big U.S. banks — JPMorgan Chase, Wells Fargo, Citi, and Bank of America — together, these four banks account for a staggering 30 percent of all fossil fuel financing from the 35 major global banks since the Paris agreement was adopted.
Also examined are the banks' support for 100 top fossil fuel companies that are expanding fossil fuels, given that there is no room for new fossil fuels in the world's carbon budget. Banks continued to support these companies with $975 billion in the last four years. Despite the urgent need to immediately halt all fossil fuel expansion, financing for these top 100 expanders skyrocketed 40 percent from 2018 to 2019.
The report card also assesses bank policy and practice around financing in certain key fossil fuel subsectors, with league tables and policy grades on:
- Tar Sands Oil: The biggest bankers of tar sands — the Canadian banks, led by TD and RBC, plus JPMorgan Chase and Barclays — all lack policies restricting their financing to this subsector.
- Arctic Oil and Gas: 2019 saw a slew of bank policies restricting financing primarily for project financing in the Arctic. But overall, bank financing to top Arctic oil and gas companies has gone up every year since Paris
- Offshore Oil and Gas: This year's report looks not just at ultra-deepwater oil and gas, but rather all offshore oil and gas, where the biggest bankers since Paris are JPMorgan Chase, Citi, and BNP Paribas.
- Fracked Oil and Gas: Fracking financing is dominated by the U.S. banks: JPMorgan Chase, Wells Fargo, Bank of America, and Citi. Only a handful of banks, all European, have begun to place significant restrictions on financing for fracked oil and gas.
- Liquefied Natural Gas (LNG)?: Morgan Stanley and JPMorgan Chase are the world's biggest bankers since Paris of top companies building LNG import and export terminals, but Mizuho was biggest in 2019.
- Coal Mining: China Construction Bank and Bank of China are the biggest bankers of coal mining, while French banks Credit Mutuel and Credit Agricole have the strongest policy scores.
- Coal Power: This is the area where bank policy scores are strongest overall; yet funding for top coal power producers is not dropping rapidly enough. Financing is led by ICBC and Bank of China, with Citi as the top non-Chinese banker of coal power.
In this new decade, the climate emergency is clearer than ever, with emissions cuts of almost 5 percent necessary by 2030 if we are to have a coin-flip chance of limiting global warming to 1.5°C. To align their policies and practices with a world that limits global warming to 1.5°C and fully respects human rights, and Indigenous rights in particular, banks must:
- Explicitly acknowledge the central role of the fossil fuel industry as the major driver of climate breakdown, as well as the banks' own role in financing this sector.
- Prohibit all financing for all fossil fuel expansion projects and companies expanding fossil fuel extraction and infrastructure (such as plants and pipelines).
- Commit to phase out all financing for fossil fuel extraction and infrastructure, on an explicit timeline that is aligned with limiting global warming to 1.5°C.
- Phase out financing for existing projects and companies active in tar sands oil, Arctic oil and gas, offshore oil and gas, fracked oil and gas, liquefied natural gas, coal mining, and coal power, with ending financing for expansion of these subsectors as an urgent first step.
- Fully respect all human rights, particularly the rights of Indigenous peoples, including their rights to their water and lands and the right to free, prior, and informed consent, as articulated in the UN Declaration on the Rights of Indigenous Peoples.156 Prohibit all financing for projects and companies that abuse human rights, including Indigenous rights.
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A Game of Jenga<p>Think of it as a game of Jenga and the planet's climate system as the tower. For generations, we have been slowly removing blocks. But at some point, we will remove a pivotal block, such as the collapse of one of the major global ocean circulation systems, for example the Atlantic Meridional Overturning Circulation (AMOC), that will cause all or part of the global climate system to fall into a planetary emergency.</p><p>But worse still, it could cause runaway damage: Where the tipping points form a domino-like cascade, where breaching one triggers breaches of others, creating an unstoppable shift to a radically and swiftly changing climate.</p><p>One of the most concerning tipping points is mass methane release. Methane can be found in deep freeze storage within permafrost and at the bottom of the deepest oceans in the form of methane hydrates. But rising sea and air temperatures are beginning to thaw these stores of methane.</p><p>This would release a powerful greenhouse gas into the atmosphere, 30-times more potent than carbon dioxide as a global warming agent. This would drastically increase temperatures and rush us towards the breach of other tipping points.</p><p>This could include the acceleration of ice thaw on all three of the globe's large, land-based ice sheets – Greenland, West Antarctica and the Wilkes Basin in East Antarctica. The potential collapse of the West Antarctic ice sheet is seen as a key tipping point, as its loss could eventually <a href="https://science.sciencemag.org/content/324/5929/901" target="_blank">raise global sea levels by 3.3 meters</a> with important regional variations.</p><p>More than that, we would be on the irreversible path to full land-ice melt, causing sea levels to rise by up to 30 meters, roughly at the rate of two meters per century, or maybe faster. Just look at the raised beaches around the world, at the last high stand of global sea level, at the end of the Pleistocene period around 120,0000 years ago, to see the evidence of such a warm world, which was just 2°C warmer than the present day.</p>
Cutting Off Circulation<p>As well as devastating low-lying and coastal areas around the world, melting polar ice could set off another tipping point: a disablement to the AMOC.</p><p>This circulation system drives a northward flow of warm, salty water on the upper layers of the ocean from the tropics to the northeast Atlantic region, and a southward flow of cold water deep in the ocean.</p><p>The ocean conveyor belt has a major effect on the climate, seasonal cycles and temperature in western and northern Europe. It means the region is warmer than other areas of similar latitude.</p><p>But melting ice from the Greenland ice sheet could threaten the AMOC system. It would dilute the salty sea water in the north Atlantic, making the water lighter and less able or unable to sink. This would slow the engine that drives this ocean circulation.</p><p><a href="https://www.carbonbrief.org/atlantic-conveyor-belt-has-slowed-15-per-cent-since-mid-twentieth-century" target="_blank">Recent research</a> suggests the AMOC has already weakened by around 15% since the middle of the 20th century. If this continues, it could have a major impact on the climate of the northern hemisphere, but particularly Europe. It may even lead to the <a href="https://ore.exeter.ac.uk/repository/handle/10871/39731?show=full" target="_blank" rel="noopener noreferrer">cessation of arable farming</a> in the UK, for instance.</p><p>It may also reduce rainfall over the Amazon basin, impact the monsoon systems in Asia and, by bringing warm waters into the Southern Ocean, further destabilize ice in Antarctica and accelerate global sea level rise.</p>
The Atlantic Meridional Overturning Circulation has a major effect on the climate. Praetorius (2018)
Is it Time to Declare a Climate Emergency?<p>At what stage, and at what rise in global temperatures, will these tipping points be reached? No one is entirely sure. It may take centuries, millennia or it could be imminent.</p><p>But as COVID-19 taught us, we need to prepare for the expected. We were aware of the risk of a pandemic. We also knew that we were not sufficiently prepared. But we didn't act in a meaningful manner. Thankfully, we have been able to fast-track the production of vaccines to combat COVID-19. But there is no vaccine for climate change once we have passed these tipping points.</p><p><a href="https://www.weforum.org/reports/the-global-risks-report-2021" target="_blank">We need to act now on our climate</a>. Act like these tipping points are imminent. And stop thinking of climate change as a slow-moving, long-term threat that enables us to kick the problem down the road and let future generations deal with it. We must take immediate action to reduce global warming and fulfill our commitments to the <a href="https://www.ipcc.ch/sr15/" target="_blank" rel="noopener noreferrer">Paris Agreement</a>, and build resilience with these tipping points in mind.</p><p>We need to plan now to mitigate greenhouse gas emissions, but we also need to plan for the impacts, such as the ability to feed everyone on the planet, develop plans to manage flood risk, as well as manage the social and geopolitical impacts of human migrations that will be a consequence of fight or flight decisions.</p><p>Breaching these tipping points would be cataclysmic and potentially far more devastating than COVID-19. Some may not enjoy hearing these messages, or consider them to be in the realm of science fiction. But if it injects a sense of urgency to make us respond to climate change like we have done to the pandemic, then we must talk more about what has happened before and will happen again.</p><p>Otherwise we will continue playing Jenga with our planet. And ultimately, there will only be one loser – us.</p>
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