Probably you are not, but your bank is.
Any time you leave your money in your bank account, it doesn’t just sit there. The bank that looks after your money puts it to work. It takes your money and lends it to various companies, businesses, and projects, to make more money (for them). A big part of these projects and investments is funding the exploitation of fossil fuels.
According to the Banking on Climate Chaos report, the world’s 60 largest banks have financed the fossil fuel industry with $4.6 trillion since the signing of the Paris Agreement in 2016.
American banks are the world leaders in funding fossil fuels, claiming the top three spots on the Banking on Climate Chaos, Fossil Fuel Finance Report 2022 list. The entire list can be found here.
Last year, JPMorgan Chase, Citi, and Wells Fargo were the world leaders in fossil fuel financing. Together, those three banks financed over $149 billion in projects from oil extraction to coal-fired power plants.
These banks provide renewable lines of credit in amounts reaching billions of dollars to their customers who trade oil. These open mechanisms do not assess how the money will be spent, which means that clients can finance projects, transactions, and ventures that would not otherwise pass banks’ environmental and social risk assessment processes.
The largest bank in the United States is JPMorgan Chase & Co and probably you are a Chase customer like me. Then you might be shocked to learn that Chase in the last six years, has funded over $382 billion in fossil fuel financing. If you keep your money in this bank, indirectly you have been contributing to the funding of fossil fuels.
You might feel encouraged by JPMorgan Chase & Co’s path to achieving net-zero emissions by 2050 but they have increased fossil fuel funding by nearly $10 billion in 2021 compared to 2020.
While many banks have now adopted some sort of coal policy, further analysis reveals this is not the case with oil and gas. The majority of financing goes towards these two sectors. According to RAN’s data, financing for coal mining companies represents just 4% of total fossil fuel lending and underwriting, compared with 26% for coal power utilities. The figure is far higher for oil and gas, standing at 67%.
It is important to focus on where big banks invest their money because it conforms to a big part of our economy. If we pressure the banks, we can make funding oil and gas production less profitable, it could slow down the expansion of fossil energy and turn investments and funding into renewable energy. Changing the banks’ approach to fossil fuels is difficult but not necessarily impossible, for these big banks, oil and gas funding constitutes only a small fraction of their loan portfolio. Getting totally out of fossil fuels would not require a wholesale rethinking of their business model.
What we consumers can do? We may consider moving to a different bank if we are not satisfied with your current bank’s policies.
Do you know how the bank invests your money? The best way is to look for certifications, such as the Global Alliance for Banking on Values; which is an independent network that prioritizes transparency and social and environmental sustainability, or looks for the Finance Initiative of the United Nations Environment Program that works with institutions from all over the world. world to develop sustainable banking practices. In addition, there are an increasing number of new and small banks promoting themselves as ethical and environmentally friendly.
Alternatives to traditional banks, such as credit unions or building societies, are also often less likely to finance fossil fuels because of the way they invest. Choosing a responsible bank is within our control. Together, we can make a difference and generate clean returns.
Illustration: https://capitalmonitor.ai/sector/energy-and-utilities/banks-still-supporting-fossil-fuels-to-the-t une-of-billions/
references: https://greenportfolio.com/blog/banking_and_climate_change/ https://capitalmonitor.ai/sector/energy-and-utilities/banks-still-supporting-fossil-fuels-to-the-t une-of-billions/ https://www.ran.org/wp-content/uploads/2022/03/BOCC_2022_vSPREAD-1.pdf