Two very significant climate commitments were made in 2021. On April 21, 2021, 43 financial institutions from around the world formed the Net Zero Banking Alliance (NZBA). They pledged to make all lending and investment portfolios net greenhouse gas neutral by 2050. More than a year later, NZBA grew into a strong 108-member alliance that committed to discontinuing finance to coal-related activities in developed nations, and other countries by 2030 and 2040, respectively.
The second important commitment was the signing of the Glasgow Statement on International Public Support for the Clean Energy Transition by 39 countries and public finance institutions at the COP 26 in Glasgow. They committed to prioritising their international public finance for a just transition towards clean energy, and ending funding of new fossil fuel projects by the end of 2022. This was perhaps the first global political commitment that aimed at addressing international public finance for oil and gas.
How are banks progressing on their commitments?
The banks and other financial institutions did not seem to walk the talk in 2021, especially on the commitment towards discontinuing financing fossil fuel-related activities. In fact, according to the Fossil Fuel Finance Report 2022, the banks continued to pump money into projects that focused on expanding fossil fuel projects. Out of the 60 banks that the report studied, 44 had committed to net zero by 2050, and yet, in 2021, they provided $145.9 billion in financing to companies that were expanding oil, gas, and coal ambitions.
The U.S. banks remained the highest funders of fossil fuel projects. Top four fossil fuel funders in the world—Bank of America, Citi, JPMorgan Chase and Wells Fargo—are all headquartered in the U.S. Combined with Goldman Sachs and Morgan Stanley, the six U.S. banks provided 29% of fossil fuel financing identified in 2021. This is in conflict with the U.S. aspirations to be a global frontrunner on climate action.
One of the few positive developments that took place recently is the announcement made by La Banque Postale—a major French bank—to suspend support for all companies expanding oil and gas, and end oil and gas financing entirely by 2030.
Are countries on track to honour their Glasgow commitment?
Not really. According to a new research by the International Institute for Sustainable Development, only a few signatories to the Glasgow Statement have published new or updated policies that convert their pledges into action. Most high-income Glasgow Statement signatories have not yet set strategies to scale up clean energy and energy efficiency financing, especially in middle- and low-income countries.
The report cautions the world of a divide between expectations and ground reality. On the one hand, experts are counting on the signatories to redirect their overseas public finance for oil and gas (US$ 28 billion a year), which would increase their international clean energy finance from US$ 18 billion a year to US$ 46 billion. On the other hand, some signatories have sent strong signals that they intend to continue financing large-scale overseas fossil fuel projects, especially after war in Ukraine have made countries looking for alternatives to reduce dependence on Russian fossil fuels.
Commitment of G7 countries
In May 2022, all G7 countries reached an agreement to end taxpayer funding for oil, gas and coal projects overseas by the end of 2022. While the G7, in 2021, had committed to ending overseas coal financing, this was the first time all seven countries agreed to end overseas financing of all fossil fuels. Hope was high that this agreement will redirect about US$33bn from fossil fuels to clean energy, every year.
A month later, the G7 leaders met and reaffirmed their pledge to end support for fossil fuel projects, but only the “unabated” ones (those projects that don’t offset pollution caused by CO2 emissions). They allowed continued investment in the gas sector. The G7 leaders watered down their commitment in a bid to reduce dependence on Russian energy supplies in response to the war in Ukraine.
UN expresses concern
As the European Union seeks to end reliance on Russian supplies of oil and gas, this is leading to increased focus on producing more fossil fuels over the next few years. This, according to the UN Secretary-General António Guterres, is "delusional". He expressed concern over the fact that more fossil fuels in global energy mix will only bring pollution and climate catastrophe. Highlighting the disconnect between the target that scientists and nations have set for reducing carbon emissions, he urged the nations to rethink their decision to signal new fossil fuel investment under the pretext of domestic and international energy security.
A communications professional with 15+ years of cumulative experience in journalism and communications, envisioning and creating digital content, and designing and spearheading communication strategy for both nonprofits and corporations. Subhojit holds a Master’s Degree in English, with an inclination for anything literary! He has 15+ years of experience in journalism and communications, designing and spearheading communication strategy for both nonprofits and corporations. He is fond of traveling, reviewing books and plays, and watching parallel films.
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