Most major banks in the US and Europe have set long-term goals to eliminate greenhouse gas emissions from their lending portfolios. Yet most remain loath to sever ties with fossil fuel companies. That’s because they constitute a big share of banks’ business and because many bank executives believe that they have a financial and moral stake in helping high-emitting companies to transition to cleaner ways of doing business. The fossil fuel industry accounts for 10% of banking business in G20 countries.
Since the Paris Agreement was adopted in 2015, the world’s 60 top fossil-fuel bankers have lent $4.6 trillion to oil and gas companies, according to a March 30 report from the Rainforest Action Network and other environmental groups. The top beneficiaries include companies like ExxonMobil and Saudi Aramco whose plans to expand drilling operations are beyond what the International Energy Agency says can be compatible with the Paris Agreement.
What does this mean for the average retail banking customer? If she keeps her savings or retirement account in one of these banks, a portion of her deposit is destined to make its way into the ledgers of fossil fuel companies, and support the production of climate-busting emissions. Switching to a less fossil-intensive bank—that is, one in which a smaller share of total financing is dedicated to fossil fuels—could be a way to limit her contribution to that process.
In the tool below, you can compare the fossil-fuel intensity of the banks researched by RAN, including a breakdown of the sub-sectors they finance.
Translating finance to personal carbon footprint is tricky
This analysis comes with a few important caveats. The first is that fossil fuel finance is not directly analogous to carbon emissions, since some banks lend more to especially carbon-intensive sectors like tar sands. The second is that banks’ lending is not limited to what they can raise through deposits; they also raise funds through capital markets and other avenues. So, the loss of climate-conscious retail customers won’t necessarily impede a bank’s ability to lend to fossil fuel companies. A deposited dollar may also be used more than once by the bank over time. Finally, switching banks doesn’t tackle the root problem, demand for fossil fuels, in the same way driving less or eating less meat might. The focus on financing also ignores the work that many banks do to lobby against climate policy, which could be an even bigger impediment to economy-wide decarbonization.
Still, finance-focused climate advocates say, if more retail customers ditch high-carbon banks, it will send a political signal and pressure on banks to exit the sector.
“No single person can shift the banking system on their own,” said Lydia Hascott, who manages a program to train bankers on climate action at the UK nonprofit Finance Innovation Lab. “But the wave of people across society caring about this could be huge. If banks understand there is this desire out there in the public and among their customers, this adds to the range of pressures banks are feeling from other stakeholders too—which together can create a tipping point.”