Since the 2015 Paris Climate Agreement banks have provided some $3.2tn to the fossil fuel industry to expand operations
SHARIFEXIM Editorial - Banks are pouring trillions of dollars into the expansion of the world’s most emitting industries in the global south, according to a new report.
Developing countries are often on the frontlines of the climate crisis yet lack the resources to enact climate action plans. As such, they require trillions of dollars in aid to decarbonize their economies and adapt to a warming world.
But financial firms are helping to push such countries in the opposite direction, the Monday analysis from international non-governmental organization ActionAid argues.
FILE - Youth plaintiffs in the climate change lawsuit, Held vs. Montana, arrive at the Lewis and Clark County Courthouse, on June 20, 2023, in Helena, Mont., for the final day of the trial. A Montana judge on Monday, Aug. 14, sided with young environmental activists who said state agencies were violating their constitutional right to a clean and healthful environment by permitting fossil fuel development without considering its effect on the climate. (Thom Bridge/Independent Record via AP, File)
“They say that money makes the world go round, but money is making the world go backwards,” Teresa Anderson, global lead on climate justice for ActionAid International, told reporters.
For the report, ActionAid worked with the international trade consulting company Profundo to compile data on major international banks’ loans and underwriting to fossil fuel and agribusiness corporations.
They found that between 2016 and 2022, those banks have provided some $3.2tn to the fossil fuel industry to expand operations in the global south.
The leading fossil fuel financiers include Chinese banks funding coal, oil and gas buildout within the nation. Top US banks like Citigroup, Bank of America and JP Morgan Chase have also offered trillions to Saudi Aramco, Exxon and other fossil fuel companies for fossil fuel activity in developing countries in regions such as South America and Africa.
In that same time span, the analysis says, major international banks have also loaned and underwritten at least $370bn for the expansion of global south-based industrial agriculture. Europe’s HSBC and the United States’ Bank of America, JP Morgan Chase and Citigroup lead the pack, offering billions of dollars to big agricultural giants like Bayer (which acquired Monsanto in 2016), ADM, Cargill and ChemChina.
Industrial agriculture is the second-most planet-heating industry globally, due to pollution from the production and use of chemical fertilizers, methane emissions from livestock, and the widespread practice of clearing carbon-sequestering greenery to make space for farms, the report explains.
“Industrial agriculture has somehow stayed out of the limelight and we feel that that needs to change for climate reasons,” said Anderson.
The research, Anderson said, highlights the disconnect between financial institutions’ public statements on climate change and their actions.
“Global banks often make public declarations that they are addressing climate change, but the scale of their continued financing of fossil fuels and industrial agriculture is simply staggering,” she said.
A separate Sierra Club analysis published last week found that major global banks have announced climate pledges but nonetheless financed coal energy across the US.
Some banks have updated their climate policies in recent years. Citigroup, for example, last year set emissions reductions targets for its energy financing and pledged to set similar targets for its agricultural loans by 2025.
And Gina Bartlett, a spokesperson for HSBC, said the bank updated its energy finance policy in December.
“Our updated energy policy, means that HSBC will no longer provide new finance or advisory services for the specific purposes of projects pertaining to new oil and gas fields, or related infrastructure in environmentally critical areas,” she said, adding that separate forestry and agricultural commodities policies “make it clear that HSBC will not provide financial services to customers directly involved in, or sourcing from suppliers, involved in deforestation”.
But between 2016 and 2022, the report says, international banks spent an average of $513bn annually on fossil fuels and industrial agriculture combined. That massive stream of funding dwarfs the amount of money global north countries have funneled to global south countries to help slash emissions and support climate adaptation.
Across the same timespan, global north governments have collectively spent just $22.25bn on international climate finance on average each year. It’s a sign that the causes of the climate crisis are receiving far more support than the solutions to it, the analysis says.
“The scale-up in the funding for fossil fuels really doesn’t make sense when we, and most of us in this world, are in this planetary crisis,” Farah Kabir, who leads ActionAid’s advocacy in Bangladesh, said.
Lorne Stockman, research director at non-profit Oil Change International, who studies the climate implications of investments, did not work on the report but said the data is “important”.
“Many fossil-fuel projects wouldn’t be able to be developed without the financial institutions backing them,” she said.
Discussions about sustainable investment and development, she said, will fail if investments aren’t redirected.
The new report’s authors call for global north governments to increase no-strings-attached public grants for renewable energy, low-carbon regenerative agriculture and climate adaptation plans in poorer nations, and also to increase regulations on the financial sector in an effort to decrease funding to polluting industries.
“We need the banks that are funding this crisis to stop funding climate destruction, and we need governments to step up so that they can provide money in a way that is fast and fair,” Amerasinghe said.
Basav Sen, climate policy director at the Institute for Policy Studies, who did not work on the report, said that because the report quantifies banks’ responsibility for the proliferation of fossil fuels and agriculture in the global south, it could also be used to bring about accountability.
“These perverse financial flows should be accounted for in calculations of how much reparations wealthy countries owe to the global south to fulfill their historical responsibility for climate change,” he said.