The 60 largest banks in the world have provided US$6.9 trillion in financing to the fossil fuel industry in the eight years since the Paris Agreement was signed, according to a comprehensive new report.
This sum includes US$3.3 trillion in financing for new fossil fuel expansion projects, investments that put the net-zero goal of the Paris Agreement in jeopardy.
Despite these alarming overall figures, bank lending and underwriting for coal, oil and gas fell for a second consecutive year in 2023, dropping 9.4% from 2022, and down more than 26% from the highest fossil financing recorded in 2019.
This is welcome news for the lead researcher on this year’s report, the 15th annual edition of Banking on Climate Chaos (BOCC), released Monday. But she says it’s too early to conclude that banks have reached peak fossil fuel financing.
“This is the second year in a row that we’ve seen a year-on-year decline in the overall financing,” says April Merleaux, researcher for the Rainforest Action Network (RAN) and BOCC’s lead collaborator.
“To me, that is somewhat hopeful,” she says. “But there’s an open question about whether banks will do things to lock that in or not. I see this as an opportunity for banks to seize this moment and lock in a business model that doesn’t depend on high revenues from fossil fuel clients.”
A total of US$705.8 billion in fossil financing was arranged in 2023, a drop from US$778.7 billion in 2022. The 2023 total is also the smallest amount of financing in the eight years of comparable data compiled by the researchers. Twenty-seven of the 60 banks increased their fossil fuel financing in 2023, and 33 decreased their financing.
In 2021, the International Energy Agency stated that to reach net-zero by 2050, there should be no investment in new fossil fuel supply projects. The BOCC report shows that many banks continue to finance companies that are expanding fossil fuel projects (aside from continuing operations), although expansion financing is also on the decline.
In 2023, US$347.5 billion was committed to fossil-fuel-expansion companies, down from US$385.2 billion in 2022. It was also the lowest level of expansion in the eight years of the report.
JP Morgan Chase top fossil bank
Topping the list of both overall financing and expansion financing is the U.S.-based bank JP Morgan Chase. At US$40.9 billion, up from US$38.7 billion in 2022, it is the largest financier to the fossil fuel industry in the world, and the largest financier to companies expanding their fossil-fuel operations at US$19.3 billion. Japanese bank Mizuho Financial is the second-largest overall, at US$37.0 billion. It’s also the second biggest at expansion financing, at US$18.8 billion.
JP Morgan told the Financial Times it is one of the world’s largest financiers to both traditional and clean energy companies, and noted its recent decision to start posting its energy supply ratio (the ratio of renewable energy financing compared with fossil fuel financing). JP Morgan, Citigroup and Royal Bank of Canada (RBC) all agreed to the measure this year under pressure from shareholder New York City pension funds.
RBC is the largest Canadian bank and seventh-largest in the world on total fossil fuel financing, at US$28.2 billion. Unlike JP Morgan Chase and Mizuho, however, RBC’s 2023 financing was down from 2022, declining 16%.
One factor in this trend is lower financing for the high-emission Canadian oil sands. RBC is tied with CIBC and Scotiabank as the largest financiers to the oil sands, at US$523.2 million each, which is down significantly from last year for RBC (2022: US$1.8 billion) and CIBC (2022: US$1.1 billion), but higher for Scotiabank (2022: US$189.7 million).
Midstream "natural gas" companies (pipelines and terminals) have overtaken oil and gas producers this year as the largest fossil fuel borrowers.
Offsetting some of these declines is a retreat by some banks on their fossil fuel exclusion policies. Bank of America is the worst offender in this regard, according to the report, having dropped exclusions on Arctic drilling, thermal coal and coal-fired power plants. The bank stands as the third-largest fossil fuel bank at $33.7 billion and fifth-largest fossil expansion bank at US$14.7 billion.
One of the key trends is that midstream "natural gas" companies (pipelines and terminals) have overtaken oil and gas producers this year as the largest fossil fuel borrowers, a sign of the growing role of gas in the energy system. The top borrower in this category was Canadian-based Enbridge, a large gas pipeline operator and the largest gas utility in North America. Financing for liquefied natural gas facilities increased to US$120.9 billion in 2023.
This year’s report draws on a number of new data sources, which means that comparisons with previous reports are not possible. Of note, it looks at fossil fuel financing and does not address the financing of renewable energy. But the new data contained in the report enables the annual comparisons since 2016. Eight climate advocacy organizations jointly wrote the report coordinated by RAN.
The report authors note that there could be a number of reasons for the decline in fossil fuel financing, including large oil majors such as Exxon Mobil self-financing their operations from recent large profits.
Regardless, Merleaux says too many banks are still financing fossil fuel expansion plans.
“The fact we see any financing for companies expanding fossil fuels really throws into question those banks’ climate commitments.”
