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Banks' fossil fuel funding rises, environmental groups warn

Bank funding for fossil fuels since the 2015 Paris agreement on climate change has risen overall, but lenders have reduced their financing to sectors such as tar sands, according to a report from a group of environmental advocacy organizations.

The Banking on Climate Change 2019 report says 33 global banks financed fossil fuel companies to the tune of $1.912 trillion between 2016 and 2018 and increased total yearly funding to $654.12 billion in 2018, up from $611.88 billion in 2016.

The sponsors of the report — BankTrack, Honor the Earth, the Indigenous Environmental Network, Oil Change International, the Rainforest Action Network and the Sierra Club — advocate the complete elimination of funding for such projects. The figures in the report are based on data from Bloomberg, energy research consultancy Rystad Energy, and Urgewald, a German environmental NGO.

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U.S. banks ranked as the largest lenders to fossil fuel projects, with JPMorgan Chase & Co. and Wells Fargo & Co. providing $195.66 billion and $151.60 billion, respectively, between 2016 and 2018. Citigroup Inc. and Bank of America Corp. were in third and fourth spot.

Among European banks, Barclays PLC ranked sixth, with HSBC Holdings PLC coming 13th, followed by Credit Suisse Group AG in 14th place, Deutsche Bank AG in 17th place and BNP Paribas SA taking the 18th spot.

'Deeper, faster moves'

Banks have taken steps to tackle climate change, but the report's authors called for further action.

"The message to banks is that it is time to drastically step up," Greig Aitken, a climate campaigner for BankTrack, said in an interview. BankTrack, a Netherlands-based NGO that focuses on finance and climate change, helped sponsor the report.

He welcomed moves by some lenders to reduce their exposure to coal power, adding that lenders needed to follow BNP Paribas Asset Management's decision to stop investing in companies that make more than 10% of their revenues from coal mining.

"People should be having a word in the ears of their investment bank colleagues, but overall the message is, you need to making much deeper, much faster moves to restrict the financing because the urgency is now very clear and greater than ever," he said.

Bank action has become more urgent since the U.N. Intergovernmental Panel on Climate Change, or IPCC, suggested the world effectively has until 2030, much earlier than previously thought, to significantly reduce emissions and limit global warming to 1.5 degrees C above preindustrial levels. The Paris agreement aims to limit global warming ideally to 1.5 degrees C and to 2 degrees at the most.

Many banks such as France's Société Générale SA, which was ranked 23rd in the report's list, have undertaken measures to reduce their exposure to coal. CEO Frédéric Oudéa told a conference in Paris in November 2018 that the transition from fossil fuels to renewable energies has to be gradual and that banks should help companies that invest in fossil fuels to find alternatives.

Moves by French banks have been prompted by national legislation passed in 2015 making banks subject to climate risk stress testing, Aitken said.

U.S. banks have also undertaken measures to tackle climate change. JPMorgan Chase has committed to $200 billion in clean energy financing through 2025, while Wells Fargo is planning to provide the same amount in financing sustainable businesses and projects by 2030.

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The report comes as the EU steps up its sustainable finance action plan announced in March 2018, putting together legislation on low-carbon benchmarks and disclosure rules, something that is supported by European banks.

"European banks share the view of [the] European Commission and fully support the priorities that have been identified, in particular the need for more international coordination [and] effective deployment of private capital towards sustainable investments," the European Banking Federation said in a statement ahead of an EU conference on sustainable finance in Brussels on March 21.

TCFD

Measures such as the G-20's Task Force on Climate-related Financial Disclosures, or TCFD, designed to help companies assess and disclose climate risk, should also be positive for the banking sector as it should help disclosure, Aitken said, adding that investor pressure and leadership at banks was also key.

"Banks are going to have to get their heads around the reporting issue and recognize what they are doing," he said.

"They may well be in a better position to know what internally they are doing and if that is the case and it is being mainstreamed across institutions hopefully it is going to be an internal wake-up call for a lot of them."

According to the report, the 33 global banks provided $600.54 billion in financing to 100 oil, gas and coal companies expanding in fossil fuels between 2016 and 2018. However, they have reduced their financing on an annual basis, funding $173.00 billion in 2018, down from $244.76 billion.

Banks have also reduced their funding of tar sands projects to $14.02 billion in 2018 from $37.52 billion in 2017 and $19.80 billion in 2016.

Financing for Arctic oil and gas rose year over year, while ultra-deepwater oil and gas financing declined.

Fracked oil and gas financing rose to $75.01 billion in 2018 from $66.36 billion in 2016. Liquid natural gas investment fell to $14.37 billion in 2018 from $20.71 billion in 2016.

Coal mining financing stood at $13.39 billion in 2018 down from $14.58 billion in 2016. Banks funded $31.20 billion in coal power projects in 2018, virtually flat from $31.93 billion in 2016, according to the report.