The Banks That Fund The Climate Crisis

Banking on Climate Change; Fossil Fuel Finance Report 2020

March 18, 2020 (Rainforest Action Network, BankTrack, Indigenous Environmental Network, OilChange, Reclaim Finance, Sierra Club)

Executive Summary

Financial companies are increasingly being recognized — by their clients, shareholders, regulators, and the general public — as climate actors, with a responsibility to mitigate their climate impact. For the banks highlighted in this report, the last year has brought a groundswell of activism demanding banks cut their fossil fuel financing, at the same time that increasingly extreme weather events have further underscored the urgency of the climate crisis.

This report adds up financing from 35 private-sector banks to the fossil fuel industry, summing their leading roles in lending and underwriting of debt and equity issuances. These 35 banks from Canada, China, Europe, Japan, and the U.S. have together funneled USD $2.7 trillion into fossil fuels in the four years since the Paris Agreement was adopted (2016-2019). The biggest fossil bank over that time was JPMorgan Chase, followed by its U.S. peers: Wells Fargo, Citi, and Bank of America. Over those four years, RBC was the biggest fossil bank in Canada, MUFG in Japan, Barclays in Europe, and Bank of China in China.

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BNP Paribas was the biggest European fossil bank in 2019, despite its policy on unconventional oil and gas financing, and along with Santander and CIBC saw the biggest percentage increase in its fossil financing from 2018-2019. The biggest absolute increase in fossil financing last year came from Bank of America.

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In addition, Banking on Climate Change 2020 names 100 top fossil fuel expansion companies and their biggest bankers. The carbon budget leaves no room for new fossil fuel extraction or infrastructure, and yet JPMorgan Chase, Citi, and Bank of America have led funding to these top expansion companies, with overall bank financing to these companies on the rise last year.

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This year’s report shifts from an A-F system to a point-based assessment of bank policies, focusing on policies restricting financing for fossil fuel expansion, as well as commitments to phase out or exclude financing for fossil fuel companies. Crédit Agricole has the strongest overall fossil policy of the banks analyzed, but by earning only about 40% of total possible points, demonstrates how far the banking sector still must move in order to align with climate stability.

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Banking on Climate Change 2020 also assesses bank policy and practice around financing in certain key fossil fuel subsectors, with league tables and policy assessments on:

» Tar sands oil: The biggest bankers of tar sands — the Canadian banks, led by TD and RBC, plus JPMorgan Chase and Barclays — all lack policies restricting their financing to this subsector.

» Arctic oil and gas: 2019 saw a slew of bank policies restricting financing primarily for project financing in the Arctic. But overall, bank financing to top Arctic oil and gas companies has gone up every year since Paris.

» Offshore oil and gas: This year’s report looks not just at ultra-deepwater oil and gas, but rather all offshore oil and gas, where the biggest bankers since Paris are JPMorgan Chase, Citi, and BNP Paribas.

» Fracked oil and gas: Fracking financing is dominated by the U.S. banks: JPMorgan Chase, Wells Fargo, Bank of America, and Citi. Only a handful of banks, all European, have begun to place significant restrictions on financing for fracked oil and gas.

» Liquefied natural gas (LNG): Morgan Stanley and JPMorgan Chase are the world’s biggest bankers since Paris of top companies building LNG import and export terminals, but Mizuho was biggest in 2019. BANKING ON CLIMATE CHANGE 2020 3

» Coal mining: China Construction Bank and Bank of China are the biggest bankers of coal mining, while French banks Crédit Mutuel and Crédit Agricole have the strongest policy scores.

» Coal power: This is the area where bank policy scores are strongest overall; yet funding for top coal power producers is not dropping rapidly enough. Financing is led by ICBC and Bank of China, with Citi as the top non-Chinese banker of coal power.

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This report maps out case studies where bank financing for fossil fuels has real impact on communities — from a planned coal mine expansion in Poland, to fracking in Argentina, to LNG terminals proposed for South Texas.

Short essays throughout highlight additional key topics, such as the need for banks to measure and phase out their climate impact (not just risk) and what Paris alignment means for banks. Traditional Indigenous knowledge is presented as an alternative paradigm for a world increasingly beset with climate chaos.

November’s U.N. climate conference in Glasgow, on the fifth anniversary of the adoption of the landmark Paris climate agreement, will be a crucial deadline for banks to align their policies and practices with a 1.5° Celsius world in which human rights are fully respected. The urgency of that task is underlined by this report’s findings that major global banks’ fossil financing has increased each year since Paris, and that even the best future-facing policies leave huge gaps.

What Banks Must Do

In this new decade, the climate emergency is clearer than ever, with emissions cuts of almost 50% necessary by 2030 if we are to have a coin-flip chance of limiting global warming to 1.5°C. Also becoming increasingly clear and accepted is the financial industry’s role in driving the crisis, and thus its responsibility to phase out its climate impact. November of 2020 will bring the next UN climate talks to Glasgow, Scotland, where, five years after the Paris Agreement was adopted, countries are expected to assess their ongoing efforts to reduce emissions and then strengthen their climate pledges.

Banks must similarly commit to align with the goals of the Paris Agreement by ending their financing for fossil fuel expansion, and committing to phase out fossil fuel financing overall. Banks must also fully respect human rights, and Indigenous rights in particular.

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To align their policies and practices with a world that limits global warming to 1.5°C and fully respects human rights, and Indigenous rights in particular, banks must:

» Explicitly acknowledge the central role of the fossil fuel industry as the major driver of climate breakdown, as well as the banks’ own role in financing this sector.

» Prohibit all financing for all fossil fuel expansion projects and companies expanding fossil fuel extraction and infrastructure (such as plants and pipelines).

» Commit to phase out all financing for fossil fuel extraction and infrastructure, on an explicit timeline that is aligned with limiting global warming to 1.5°C.

» Phase out financing for existing projects and companies active in tar sands oil, Arctic oil and gas, offshore oil and gas, fracked oil and gas, liquefied natural gas, coal mining, and coal power, with ending financing for expansion of these subsectors as an urgent first step.

» Fully respect all human rights, particularly the rights of Indigenous peoples, including their rights to their water and lands and the right to free, prior, and informed consent, as articulated in the UN Declaration on the Rights of Indigenous Peoples.156 Prohibit all financing for projects and companies that abuse human rights, including Indigenous rights…

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