The world's largest banks are showing little progress when it comes to their promise of helping the world avoid the worst consequences of global warming.
According to researchers at BloombergNEF, the ratio of spending on low-carbon infrastructure relative to fossil fuels needs to reach 4 to 1 by 2030 to limit climate change. At the end of 2023, the so-called energy-supply banking ratio, which includes debt and equity underwriting, was 0.89 to 1, up from 0.74 in 2022 and 0.78 in 2021.
The latest BNEF data show that investment in low-carbon energy surpassed capital flows into oil, gas and coal projects for the first time, while bank financing for fossil fuels fell in 2023. However, part of the reason for the decline in financing was China, where more companies switched to loans from bonds — and data on loans is harder to nail down.
To measure the amount of capital spending on energy infrastructure, BNEF uses what it calls the low carbon to fossil-fuel "energy supply investment ratio." The ESIR ratio was 1.11 to 1 at the end of 2023, up from 1 to 1 in the prior year.
The BNEF report comes as banks back away from the industry's largest climate-finance alliance, raising questions about their long-term commitment to addressing climate change. All the banks, including
BNEF's research adds to reports that say any headway made to date by banks isn't nearly enough for the planet to reach the crucial goal of net zero emissions by mid-century. Earth's warming exceeded 1.5C on an annual basis for the first time last year, according to
Since the Paris deal was clinched at the end of 2015, almost $6 trillion of bonds and loans have been committed to businesses focused on hydrocarbons, compared with the $3.8 trillion arranged for renewable projects and other climate-friendly ventures, according to data compiled by Bloomberg.
Banks have faced considerable criticism for continuing to profit handsomely from their partnership with Big Oil in the face of a planetary climate crisis. Industry executives have sought to defend themselves by saying they want to assist in the transition to a low-carbon economy by staying engaged with their oil, gas and coal clients.
The BNEF data provide one of the few yardsticks for measuring progress, since hardly any major banks and asset managers provide estimates for the emissions connected with their stock and bond underwriting.
The study examines the loans, bonds, equity and project financing underwritten for the energy sector and other relevant issuers. The researchers include tax equity, which represents a growing share of renewables-project finance, particularly in the US.
BNEF then applies what it calls an adjustment factor to estimate the amount of funding raised for low-carbon energy relative to fossil fuels. It looked at roughly 1,000 banks engaged in some form of supply underwriting.
The analysis found that bank financing for fossil fuel and low carbon energy supplies totaled $1.6 trillion in 2023, down from $1.8 trillion the prior year. From the 2023 figures, BNEF came up with the energy-supply banking ratio of 0.89 for the industry.
Of the largest banks, BNP Paribas had an ESBR that's closest to 4.0. NatWest Group ranked second, at 2.24. Royal Bank of Canada's was the lowest of the world's biggest lenders, at 0.47.
Regionally, banks in North America accounted for the largest share of energy-supply financing. Their average ESBR was roughly 0.7 at the end of 2023, compared with 1.5 for European-based banks.
Chinese banks continue to dominate the market for coal financing, underwriting about 66% of the $94 billion that went to the sector in 2023, BNEF reported. The US was a distant second, followed by Pakistan and Singapore.
