Banking Against Science: Financial Institutions Continue to Fund Climate Destruction

December 2, 2022 | 1:35 pm
session at COP27Johann Olivier/Flickr
Derrick Z. Jackson

At the start of the recent COP 27 climate meeting in Egypt, a United Nations report on the role of financial institutions in controlling climate change said, “There is no room for new investment in fossil fuel supply.”

With COP 27 now concluded, fossil fuel investment remains the elephant in the room. The international meeting yielded no breakthrough on phasing down emissions nor on the unconscionable levels to which banks and asset managers continue to bankroll oil, gas and coal. Any hope of keeping planetary temperatures below catastrophic levels must confront this stampede of greed and greenwashing hypocrisy.

Five years ago, the World Bank said it would end investments in oil and gas extraction by 2019. Instead, the bank continued to fund nearly $15 billion in fossil fuel projects into 2021 according to a report last month endorsed by a global consortium of environmental groups. World Bank President David Malpass, appointed in 2019 by climate-denying President Trump, damaged that organization’s credibility even further this fall by refusing, in a public forum, to acknowledge that human activities cause climate change.

Then there’s the Glasgow Financial Alliance for Net Zero (GFANZ). It is a coalition of more than 550 of the world’s top financial institutions controlling more than $150 trillion in assets. A year ago, GFANZ said all its members “must align” their portfolios to the UN’s Race to Zero “stringent criteria” aimed at halving global emissions by 2030 and bringing net carbon emissions to zero by 2050. Scientists say such targets would help keep the average global temperature increase under 1.5 degrees centigrade and avoid the worst effects of global warming. GFANZ also said its members must “commit to transparent reporting and accounting” on emissions reductions targets.

That was a year ago, as corporations scrambled for good public relations for COP 26. Since then, it clearly dawned on many GFANZ members that they might actually be held accountable for whether they truly slash fossil fuel investments. By September, multiple news reports had Wall Street titans J.P. Morgan and Bank of America threatening to pull out of GFANZ. Unnamed bank executives told the Financial Times that their cold feet were due to fears of being sued for not hitting targets while governments and other entities were hardly unified on agreeing to uniform commitments to cut emissions.

That rebellion forced GFANZ Co-Chair Mark Carney to declare that banks would not abide by “legally binding strictures” to stop funding of fossil fuels. That is another way of saying the jig is up on “greenwashing,” the corporate practice of misleading consumers and investors with false or misleading claims of environmental and social benefits of their products and portfolios.

Examples this year on the consumer side: $5.5 million in fines for Walmart and Kohl’s from the Federal Trade Commission for bogus eco claims on textiles. In the finance sector, BNY Mellon and Goldman Sachs were also fined a total of $5.5 million by the Securities and Exchange Commission for omissions, misstatements and failures to follow their own ESG (Environmental, Social and corporate Governance) procedures in funds that are supposed to factor in sustainability, climate risks and human rights.

The Race to Zero tried to mollify GFANZ and the global financial sector by replacing language in its criteria. A section that required members to “restrict the development, financing and facilitation of new fossil assets” was changed to a voluntary pledge for each Race to Zero member to “independently undertake an approach” to phase out fossil fuels “in compliance with all legal and professional obligations.”

But, apparently, even that wasn’t enough. Ahead of COP 27, Carney announced that GFANZ members were no longer required to adhere to Race to Zero criteria. Instead, the organization (also co-chaired by business media mogul and former New York City Mayor Michael Bloomberg) said members were on their own to come up with “voluntary” net-zero plans. Members now merely need to “take note of the advice and guidance” of the Race to Zero and top bodies engaged in climate science, such as the Intergovernmental Panel on Climate Change (IPCC) and the International Energy Agency (IEA).

That “take note” language translates into GFANZ effectively thumbing its nose at science. BlackRock, the world’s largest asset manager and a member of GFANZ, bluntly told the British government that it will continue funding oil and gas projects. Reuters reported that BlackRock said its role in the energy transition “is as a fiduciary to our clients – it is not to engineer a specific decarbonization outcome in the real economy.”

Vanguard, the world’s second-largest asset manager, said it will continue to invest in coal. BlackRock and Vanguard have combined coal holdings worth $60 billion, and combined holdings of $263 billion in the top oil majors, according to Reclaim Finance. Vanguard CEO Tim Buckley told the Financial Times this year, “Our duty is to maximize long-term total returns for clients. Climate change is a material risk, but it is only one factor in an investment decision.”   

Banking against science

In addition to the UN report that said there was “no room” for new fossil fuel projects, the International Energy Agency (IEA) said a year ago that there should be “no investment in new fossil fuel supply projects.” And a report in October by the International Institute for Sustainable Development said: “Developing any new oil and gas fields is incompatible with limiting warming to 1.5°C.”

Earlier this year, the IPCC stopped short of calling for a halt on all new fossil investments, but nonetheless said that “all” modeled pathways to limiting global warming to either 1.5 or 2.0 degrees centigrade “involve rapid and deep and in most cases immediate GHG (greenhouse gas) emission reductions in all sectors.” That clearly includes natural gas—which oil and gas companies continue to tout as a “bridge” fuel from coal to renewable energy. The IPCC said that the deep emissions reductions required by 2030 and 2040 “particularly” include methane, the top emission of natural gas production and combustion, which traps 80 times as much heat as carbon dioxide over short timescales.

Inger Andersen, executive director of the UN Environment Program, warned in October that the world is currently on track for a 2.4-to-2.6-degree centigrade rise in global average temperatures.  “We had our chance to make incremental changes, but that time is over,” Andersen said. “Only a root-and-branch transformation of our economies and societies can save us from accelerating climate disaster.”

Fossil fuel spending outpaces green energy financing

That means that, until they prove otherwise, the world’s top financial institutions remain at the root of resistance to a renewable future and net zero. They prop up fossil fuel industry infrastructure as the industry itself buys political influence to blunt and block any unified strategy for a fossil phase-down. COP 27 had a record number of fossil fuel lobbyists in attendance, and they got what they came for. As important as it was that a COP meeting finally established a “loss and damage” fund for less-resourced nations already suffering climate tragedies, what does it really matter, when capital continues to flow freely to fossil fuels?

The United States is at the center of much of this. It is historically the biggest contributor to global warming and remains by far the biggest contributor of carbon pollution among rich countries. Despite President Biden going to Egypt to announce that the United States “is putting our money where our mouth is to strengthen accountability for climate risk,” the largest US banks are working behind the scenes to avoid accountability while massively increasing climate risk.

While Biden pledged to work with Congress to double the US contribution to international climate aid to $11.4 billion a year (a dubious pledge given that the Republican Party, riddled with climate deniers, is taking back the House of Representatives), banks continue to fund fossil fuel expansion by many magnitudes more. At the beginning of COP 27, the Rainforest Action Network, in a report endorsed by many environmental groups, found that Bank of America, J.P. Morgan Chase, Wells Fargo, Citi, Goldman Sachs and Morgan Stanley together funded fossil-fuel expansion for the top 100 fossil-fuel companies, to the tune of $445 billion from 2016 to 2021.

These six banks alone were responsible for a third of the $1.3 trillion of global investments in the top 100 fossil fuel companies. The top recipient of project financing from the six banks was ExxonMobil at $56 billion. BP, Shell, Aramco and two Texas oil and gas companies, Pioneer Natural Resources and Diamondback Energy, all received between $23 billion and $31 billion in financing. In addition, gas and oil pipeline builders TC Energy and Enbridge received a respective $26 billion and $21 billion from most of the top six banks.

European banking also rife with fossil funding

European banking is also riddled with green investment hypocrisy, despite the European Union having a binding agreement to cut global warming emissions by 55 percent by 2030 and reach carbon neutrality by 2050. A nine-nation consortium of leading European news and investigative outlets reported last month that almost half of the continent’s investment funds that claimed the highest level of sustainability harbored at least $8.5 billion euros of investments in fossil fuels and aviation. Oil and gas companies that somehow were funded through green investments included Shell, BP, Aramco, Total and Equinor. Funded airlines included Delta, Lufthansa, and Air France-KLM. Some funds even made their way to the coal-fired power sector and mining industry, to RWE, Glencoe and Uniper.

This funding comes amid sustainability claims by some of the recipient companies that are an insult to the intelligence. Virtually all oil majors make some form of “net zero” pledges in their operations, which have repeatedly been exposed as greenwashing. One example is a study published this year in PLOS One by researchers in Japan of the environmental pledges made over the last decade by US oil titans ExxonMobil and Chevron and European majors Shell and BP. The study, designed with input from the Union of Concerned Scientists (UCS), found a wide gap between the “insignificant and opaque” environmental pledges and a business model still locked in on fossil fuel extraction. The study found that no major company was “currently on the way to a clean energy transition,” and that “accusations of greenwashing by oil majors are well-founded.”

The gap is growing even wider, in broad daylight and behind closed doors. Oil and gas executives parlayed energy disruptions from Russia’s war on Ukraine into record windfall profits and into public relations disinformation campaigns to persuade governments to increase production, instead of ramping up renewable energy. The American Petroleum Institute falsely blamed the Biden administration’s climate and conservation policies for high energy prices, when there were many other domestic and global factors, from COVID-19 to decisions by OPEC.

Then, internal documents unveiled this fall by a House oversight investigative committee detailed how oil executives from Exxon, Chevron, Shell, and BP contradicted public stances on sustainability making private dismissals of climate change, weakening industry climate initiatives, and mocking climate activists. A document from Shell advised employees, when talking about its net zero pledge: “Please do not give the impression that Shell is willing to reduce carbon dioxide emissions to levels that do not make business sense.” One Shell executive wished bedbugs on the youth-led Sunrise Movement.

Among the most honest, and damning documents were memos from Exxon’s environmental policy manager, Peter Trelenberg to CEO Darren Woods. Trelenberg, in concert with Chevron, advised Woods that industry-wide climate policy should not refer to the 2015 Paris Agreement to hold global average temperature increases to well below 2 degrees centigrade. That is because Trelenberg knew that the public pledges of the oil majors did not match their business models. He wrote Woods to say: “We do not currently see a policy framework, finance flows, or affordable” technology to support “this rapid, unprecedented transformation of the energy system.”

Meanwhile, the degradation of the planet by these companies billows on. A 2019 UCS study found that Shell, Chevron, ExxonMobil and BP were four of the top seven historical and current contributors of carbon dioxide to the world’s oceans, fueling their acidification.

The sad fact is the oil majors have little or no incentive to give any impression about caring about climate change when, between 2019 and 2021, G20 countries and multinational banks continued to bankroll fossil fuel projects at nearly double the level of renewable energy projects, according to a report last month from Oil Change International and Friends of the Earth. Fossil fuel projects received $55 billion a year from the G20, while renewable infrastructure received $29 billion a year.

This is the same G20 that last month reaffirmed a pledge it made a year ago to “pursue efforts” to limit global warming to a 1.5 degree centigrade increase in average global temperature. The G20 said, “This will require meaningful and effective actions and commitment by all countries.”

The first meaningful action and commitment the G20, the World Bank, Wall Street and the world’s asset managers can take is to announce an end to fossil fuel financing.

All else is greenwashing.