The six major U.S. banks are behind more than one-third of the financing to expand fossil-fuel extraction, according to an update to a closely followed annual report put out by a collection of climate-change policy groups.
According to the Rainforest Action Network (RAN), the top 60 banks by assets globally provided a total of $1.3 trillion to the top 100 companies expanding fossil fuels between 2016 and 2021 — the years since the Paris climate accord. The network of advocacy organizations released the update on Wednesday on the sidelines of the U.N.’s COP27 climate summit.
Of that $1.3 trillion, the big six U.S. banks — Bank of America
BAC,
JPMorgan Chase
JPM,
Citi
C,
Wells Fargo
WFC,
Morgan Stanley
MS,
and Goldman Sachs
GS,
— provided 33%, or funding valued at about $445 billion, to the top 100 coal, oil and gas expanders.
RAN released its comprehensive annual report in March.
The updated look at the increased financing of the fossil-fuel industry comes as the banks say they have joined global efforts to cut carbon emissions in half by as early as 2030, on the way to a target of net-zero emissions by 2050.
“Fossil expansion is a clear litmus test for assessing the seriousness of banks’ net-zero commitments because of the hard but unavoidable carbon math, both on the supply side and the demand side,” RAN said with its release.
Net-zero commitments call for the reduction of atmosphere-warming emissions that have led to deadly drought and more severe storms, which are costly in both human and economic terms. Banks have made their own net-zero pledges specific to their operations, but advocates want to see more action throughout the financial pipeline.
As RAN and other groups have pointed out, even oil-industry groups have said that new production must be curtailed to reach emissions milestones.
“If governments are serious about the climate crisis, there can be no new investments in oil
CL00,
gas
NG00,
and coal, from now, from this year,” Fatih Birol, executive director of the International Energy Agency, said in 2021, surprising the industry with the stark proclamation.
On the supply side, potential emissions from the oil, gas, and coal in already developed fields — where wells have already been drilled and mines dug and fossil supplies are already coming out of the ground — take the world well past 1.5°C of warming and jeopardize the target limit of well below 2°C, RAN said. Those are the temperature targets laid out in the 2015 Paris climate accord.
This is to say nothing about the much larger quantities of undeveloped reserves that oil, gas, and coal companies already own, RAN added.
The Sierra Club, which is a RAN backer, also released its own look at the financial sector in recent days.
The net-zero emissions commitments from Wall Street’s banking giants was a significant step toward holding global warming in check, but in the almost two years since each of the U.S. majors made those commitments, their progress has remained slow, the Sierra Club said.
Its report examines the banks’ interim 2030 targets to cut greenhouse-gas emissions that result not only from their own operations but also from their financing of the energy sector and other industrial segments of the economy.
Lawmakers and even some climate watchers want both big finance and big oil to play a major role in the transition to cleaner energy, because their reach can help make these new technologies possible at the scale that will be needed.
For now, “big U.S. banks have fallen far behind the best practices of their global peers, setting only weak targets and policies riddled with loopholes that allow billions of dollars in new fossil fuels projects each year,” said Adele Shraiman, campaign representative for the Sierra Club’s Fossil-Free Finance campaign.
“If banks want to live up to their net-zero pledges, they need to commit to real emissions reductions and end financing for companies expanding fossil fuels,” she added.
The RAN and Sierra Club reports came out — and the nearly two-week-long COP27 conference is happening — as the world faces high inflation and volatile energy markets, in part due to Russia’s invasion of Ukraine.
At the same time, in a close U.S. midterm election, several key races are still being tallied.
Republican election campaign messaging has included complaints about high gasoline prices and concerns about the availability of natural gas and the cost of alternatives, such as liquefied natural gas, in the wake of disrupted global markets in the months since Russia invaded Ukraine. That messaging dovetails with a GOP argument that the U.S. should pump more of its own energy to avoid having to rely on Russia and the Middle East.
In the U.S., fossil-fuel interests and their mostly Republican backers have pushed for natural gas to remain a fixture in a mixed energy picture that includes wind, solar and other alternatives.
And coal, long targeted as the “dirtiest” emitter and largely replaced by natural gas to power U.S. electricity, remains a political sticking point.
If the world ended coal production tomorrow, which is not likely, potential emissions just from the oil and gas fields already in production could exhaust the carbon budget for 1.5°C, RAN aruged. China and India, as two examples, were coal-reduction holdouts at the last COP summit, a stand that led to a watering-down of the broader group’s postconference communique. Parts of Europe have also revisited coal as energy markets have been roiled this year.
“We see the [traditional energy industry] using the Ukraine invasion as an excuse,” April Merleaux, research manager at RAN, told MarketWatch. “We’re talking about expansion of facilities that require several years to be up and running and adding to emissions down the road, not any sort of solution to a short-term issue. Reputable energy analysis says there is sufficient capacity with [liquefied natural gas or LNG] to meet the emergency needs in Europe.”
“Energy earnings and stock buybacks and dividends contrast with energy shortages that we’re saying can be addressed with what are likely profitable investments,” she added.
Exxon Mobil
XOM,
for one, blew past earnings estimates for the third quarter in its report in late October. Chevron’s
CVX,
stock price hit a record after its earnings beat analysts’ expectations.
