Global Banks Reverse Course on Fossil Fuel Financing Amid Criticism
In 2024, global banks demonstrated a significant reversal in their approach to fossil fuel financing, with an increase of nearly $200 billion. This marked a departure from the previous three-year trend where major financial institutions had been reducing funding for polluting enterprises. Shareholders and non-governmental organizations have accused these banks of "climate hypocrisy," suggesting that they are exposing themselves to greater liability risks by continuing to back carbon-intensive industries. According to a report titled "Banking on Climate Chaos," published by the Rainforest Action Network and other groups, the world's largest banks collectively committed over $869 billion to oil, gas, and coal companies, representing a substantial rise compared to the prior year.
The primary driver behind this resurgence in fossil fuel investments was identified as an almost $117 billion surge in bond and share underwriting for such companies. Nikki Reisch, director of the climate and energy program at the Center for International Environmental Law, pointed out that this regression correlates with backlash against ESG investment strategies. She argued that banks are prioritizing short-term gains over long-term stability due to pressure from conservative political forces. Among the top offenders noted in the report were JPMorgan Chase, Citigroup, Bank of America, and Barclays, which saw some of the most pronounced increases in financing for fossil fuels.
Barclays, particularly, drew criticism for its sharp 55.5% annual increase in fossil fuel funding. Andrew Harper, deputy chief executive at Epworth Investment Management, expressed alarm at Barclays' actions, stating that while the bank claims commitment to net-zero goals, its practices suggest otherwise. He labeled this behavior as "climate retreat" rather than leadership. In response, a Barclays spokesperson highlighted efforts to support both traditional and renewable energy sectors, pledging substantial investments in sustainable initiatives aimed at fostering cleaner energy systems.
JPMorgan maintained its status as the leading financier of fossil fuels globally, committing $53.5 billion in 2024—a figure nearly 40% higher than the previous year. Despite investor pressures, the institution emphasized that its internal data more accurately reflects its activities compared to external estimates. Meanwhile, BloombergNEF research indicates that achieving the necessary balance between clean and dirty energy financing requires a ratio far exceeding current levels to limit global warming to 1.5 degrees Celsius.
Legal challenges faced by U.S. banks underscore growing tensions regarding climate commitments versus financial practices. Critics argue that without binding regulations, voluntary pledges fall short of addressing systemic risks posed by climate change. Following Donald Trump’s re-election and subsequent withdrawal from international climate agreements, several major banks exited the Net-Zero Banking Alliance, further aligning with deregulatory policies favoring fossil fuel expansion.
While some European banks reduced their fossil fuel investments, others like Barclays increased significantly. Advocates stress the need for comprehensive regulatory frameworks targeting corporate financing patterns within the banking sector. They urge shareholders to press for meaningful reforms, though skepticism remains about the effectiveness of market mechanisms alone in driving necessary changes.
This shift in financial strategy raises critical questions about the ability of global markets to respond effectively to environmental crises. As banks navigate complex geopolitical landscapes, balancing economic interests with ecological responsibility becomes increasingly challenging yet essential for sustainable future development.