Big banking is saying little on how they will combat climate change through their financing, shows a new study which finds minimal, clear commitments to aid financing away from fossil fuels. The top 10 banks – ranked as the largest funders of fossil fuel organizations – are talking more about climate change in general. However, in an analysis of annual reports, these banks were found to be vague when it comes to initiatives to counter it.
In 2020 alone, $425.92bn was spent financing fossil fuels by this group – which includes banks from the US, such as JP Morgan Chase; the UK, Barclays; Canada, Toronto Dominion Bank; and Japan, Mitsubishi UFJ Financial Group. Published today in the peer-reviewed journal Climate Policy, the findings of this new study include a plea from the experts to change the way banks support the fossil fuel industry. The team, based at the University of Gothenburg, also set a three-point list of recommendations.
The academic team – which also includes co-author Jasmine Elliott, a PhD student from Gothenburg’s Department of Philosophy, Linguistics and Theory of Science – expects “public pressure” to likely affect the banks’ priorities and strategies in relation to climate change. The team’s recommendations for policy changes include:
Climate-related financial disclosures should target banks’ climate impact in relation to their client financing; in a clear and contextualized manner, so it is accountable.Effective policies to explicitly consider how banks should measure and reduce climate impacts in a way that is comparable – aligned with the Paris Agreement – and in relation to credit financing operations to clients. Legislation mandating human rights and environmental due diligence implemented with explicit considerations in relation to climate change.
Their paper analyses the annual reports from 2015 to 2019 for the world’s 10 largest banks, based on their level of financing fossil fuels following from the 2020 Banking on Climate Change report. The biggest financier is JP Morgan Chase with $64.93bn, followed by Citigroup with $52.41bn. Scotiabank round-up the top 10 with $26.04bn spent.
Limitations of the study include it being a review of annual reports, and not specific ‘sustainability and environmental, social, and governance initiative’ documents. However, the authors argue an annual report is “one of the best ways to get an overall snapshot of a company’s priorities and what the company wants to portray to the public”.