The 60 largest commercial and investment banks have collectively financed $3.8 trillion in fossil fuel companies between 2016 and 2020, the five years since the Paris Agreement was signed.
Some banks have been increasing their business with fossil fuel companies while others have been decreasing during that time.
What’s clear is the power banks wield in affecting climate change.
“Getting lenders to choke off money to fossil fuel companies is the next needed move for the industry to address the material risks that the coal, oil and gas industry faces,” says Leslie Samuelrich, president at investment advisory firm Green Century Capital Management.
According to Ben Ratner, a senior director at the Environmental Defense Fund who leads the business energy transition team, “alongside reducing overall funding to the fossil fuel industry, banks should use their most powerful tools – like loan eligibility and rates – to incentivize corporate clients to reduce polluting practices like methane emissions and gas flaring, while transitioning to sustainable business models.”
The two banks that increased fossil fuel financing the most are in China
From 2016 to 2020, Postal Savings Bank of China had the largest percent change in fossil fuel financing — it increased over 1,200% from $168 million in 2016 to $2.2 billion in 2020, according to CNBC Make It’s analysis using data from the Banking on Climate Chaos 2021 report.
China Minsheng Bank had the second highest percentage change in fossil fuel financing from 2016 to 2020 with a 550% increase, as its financing went from $1.7 billion to $10.8 billion, according to CNBC’s analysis.
Neither Postal Savings Bank of China nor China Minsheng Bank responded to CNBC Make It’s request for comment.
However, Zhang Jinliang, chairman of Postal Savings Bank of China, said in a March 29 statement on the company’s corporate social responsibility that the bank “upheld the vision of a community with a shared future for mankind, aggressively pursued green development,
promoted green finance and climate financing, strengthened environmental, social and governance (ESG) risk management, and promoted green operation and working in an environment-friendly way.”
Two banks that decreased their fossil fuel financing the most are based in Europe
At the other end of the spectrum, French cooperatively owned bank Crédit Mutuel had the largest drop in fossil fuel financing, with a 100% decline from $19 million in 2016 to zero in 2020, according to CNBC Make It’s analysis using data from the Banking on Climate Chaos 2021 report.
“In 2018, we made a decision to stop all financing for coal-fired power plants and coal mining in all countries,” says a spokesperson for the Crédit Mutuel, a cooperative bank that is owned by its customers.
In 2020, Crédit Mutuel decided it was willing to lose money “in the short term” for its fossil fuel goals.
″[T]oo many of the commitments made by companies will only serve to weigh on those who come after us,” says the bank spokesperson. “In the course of our banking business, we develop balance sheets over 10, 20 and 30-year periods … it is only natural therefore that we pay particular attention to global warming, which is having an increasingly strong impact on our customers (and therefore on the bank). This calls for rapid action.”
“In a nutshell, finance is both global and local. Where local banks see or predict fossil fuel consumption increasing in local markets, they increase lending. Where local banks envision a drop in demand, they curb lending,” says Jonathan Macey, professor of corporate law, corporate finance and securities law at Yale University.
So, data ranking banks’ fossil fuel financing “gives us a good window into possible global patterns of fossil fuel production and possible global patterns of shifting to renewables,” Macey says.
A need to make money and keep customers happy is also a motivator for banks.
“The move away from fossil fuels by asset managers has been hampered by fears of potential underperformance and concerns about alienating their clients but [it] is finally gaining traction,” Samuelrich says.
Then there’s public perception: “Lenders are more reluctant to lend to fossil fuel producers where there is a lot of environmental activism. In a totalitarian controlled economy, such activism does not have much impact,” he says.
But many of the large energy companies that are still active in fossil fuels are transitioning to clean energy and therefore will need funding, as such projects are “more capital intensive,” says James Vaccaro, the executive director of Climate Safe Lending Network. So “sometimes this is part of a positive story” for the banks, he says.
CNBC Make It used data from a report published in March from a collection of climate organizations and titled Banking on Climate Chaos 2021. The report was a collaboration by seven non-profits: Rainforest Action Network, Bank Track, Indigenous Environmental Network, Oil Change International, Reclaim Finance, and Sierra Club. And for it, the report authors aggregate bank lending and underwriting data using Bloomberg’s league credit methodology, meaning credit is divided between banks playing a leading role in a given transaction, and uses data from Bloomberg Finance L.P. and the Global Coal Exit List. Prior to the report being published, banks were given the opportunity to weigh in on the findings.