In a bluegrass song by Gillian Welch, a woman, Miss Ohio, drives down the highway, the ragtop of her convertible down. She is trying hard to listen to her better angels, but can’t quite hear them. “I wanna do right,” she says in Welch’s song, “but not right now.”
That, effectively, is the soundtrack for the world’s biggest financial institutions right now. They’re ready to talk about eliminating carbon emissions from their lending portfolios—just not do it quite yet. More than 100 commercial leading banks have set net-zero targets. But many of the same banks continue to pour tens of billions of dollars into the oil, gas, and coal industries, according to two new reports out this week. The reports show the scale of finance supporting companies with plans to expand their fossil fuel production, at a time when scientists and analysts agree they should instead be rapidly switching to cleaner alternatives.
European banks have provided $400 billion to oil and gas companies
Few banks have offered details about how they plan to deal with the oil and gas companies with which they do business. Even fewer have pulled the plug on loans or underwriting for those companies. But 103 of the world’s top commercial banks signed up to the Net Zero Banking Alliance, a group managing 44% of global banking assets, at the COP26 climate summit in November. The Alliance members commit to reaching net-zero emissions in their portfolios by 2050.
Yet since 2016, European members of the NZBA have provided at least $400 billion to oil and gas companies that have plans to expand production, according to a Feb. 14 report by the UK advocacy group ShareAction. That includes $38 billion since the NBZA was founded in April 2021. That directly counters the International Energy Agency’s assertion no new oil and gas fields must be opened to achieve climate targets in the Paris Agreement.
The same story is playing out in coal. Since Jan. 2019, commercial banks have lent or underwritten $1.5 trillion to companies that either mine coal—the highest-emitting fossil fuel—or burn it in power plants, according to a Feb. 15 report by German environmental nonprofit Urgewald. The report found this is providing a vital lifeline to an industry under enormous political pressure to wind down. The worst offenders were predominantly in China, but also includes banks in Japan, the US, and Europe that are members of the NZBA.
Institutional investors that are members of the Net Zero Asset Managers Initiative (a parallel group to the NZBA), including BlackRock and Vanguard, also continue to hold billions of dollars shares and bonds in coal companies, the Urgewald report found.
Asset managers will have a chance to change their tune in the next few months when they vote on dozens of climate-related resolutions at companies in which they hold shares.