World's largest banks raked in $3bn from green debt last year

Lenders extended $583 billion in green bonds and loans last year, compared with $527 billion of fossil fuel debt

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For the second year in a row, global banks made more money underwriting bonds and providing loans for green projects than they earned from financing oil, gas and coal activities.

The world’s biggest lenders generated a total of about $3 billion in fees last year from lining up debt for deals marketed as environmentally friendly, according to data compiled by Bloomberg. By comparison, the sector brought in less than $2.7 billion in aggregate earnings from fossil-fuel transactions.

European banks led the transition, with BNP Paribas topping Bloomberg’s green debt league table. Meanwhile, Wall Street dominated fossil finance, with Wells Fargo and JPMorgan Chase generating the biggest earnings from oil and gas deals.

BNP, the European Union’s largest bank, got close to $130 million last year from its green finance business. Credit Agricole was next with $96 million and then HSBC Holdings with $94 million.

On the other side of the energy divide, Wells Fargo earned fees of $107 million from arranging bonds and loans for the fossil fuel sector, followed closely by JPMorgan and Mitsubishi UFJ Financial Group, both with $106 million. MUFG was also last year’s top arranger of global green loans.

The development coincides with stricter regulations in Europe, where both the European Central Bank and the region’s top banking authority have made clear they want the finance industry to speed up its green transition.

Lenders in Europe now face the threat of fines and higher capital requirements if they mismanage climate exposures. In response, many banks are imposing explicit restrictions on fossil finance.

In the US, meanwhile, the regulatory outlook remains uncertain and fragmented as many Republican states place hurdles in the way of the green transition.

Banks suspected of withholding financing from the oil and gas sector increasingly face retaliation, with Texas among states threatening to cut off Wall Street firms that embrace net-zero emissions goals.

Against that backdrop, the global finance industry has fallen well short of where it needs to be if the goals of the Paris Agreement are to be met.

According to an analysis by BloombergNEF, four times as much capital needs to be allocated to green projects as to fossil fuels by 2030 to align with net zero emissions targets.

Yet at the end of 2022, that ratio was just 0.7 to 1, largely unchanged from the previous year, BNEF’s latest figures show.

Bank financing isn’t “anywhere close” to the transition levels needed, said Trina White, sustainable-finance analyst at BNEF, when the December report was published.

US climate envoy John Kerry warns time is running out

US climate envoy John Kerry warns time is running out

The perceived foot-dragging by global banks has environmentalists sounding the alarm.

“Banks still aren’t keeping pace with the rate of transition that’s required to avoid catastrophic climate change,” said Jason Schwartz, senior communications strategist at Sunrise Project, a non-profit focused on the financial sector’s contribution to global warming.

The shifting trends of the past year are “more indicative of broader macroeconomic trends than any proactive efforts in the banking sector to reduce financing for carbon-intensive energy”, said Adele Shraiman, senior campaign strategist at Sierra Club.

“The reality is that banks aren’t transitioning their energy financing quickly enough to meet their own climate goals.”

Last year was the hottest on record, according to the Global Carbon Project. The group, which represents an international collaboration of scientists, estimates that carbon dioxide emissions from burning fossil fuels rose 1.1 per cent to a new high in 2023, putting the planet on track to exceed its carbon budget for 1.5°C of warming by the end of the decade.

Overall, banks extended $583 billion in green bonds and loans last year, compared with $527 billion of fossil fuel debt. In 2022, banks channelled $594 billion into environmental projects, and $558 billion into oil, gas and coal, the Bloomberg data show.

For several years now, the world’s biggest banks have published reports showing the vast sums of money they say they’re allocating toward a greener, fairer planet.

But some of those assertions are now being questioned, amid an absence of regulatory guideposts to help stakeholders make sense of such claims.

Updated: January 05, 2024, 3:00 AM