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HomeLatest NewsBanks must multiply their volume of 'green' loans by five

Banks must multiply their volume of ‘green’ loans by five

Date: April 1, 2023 Time: 23:56:37

Banks need a bigger turn towards low carbon emissions to avoid the climate crisis. According to Bloomberg calculations, for us to stay in the race towards the achievement of the Paris Agreement, the proportion of ‘green’ loans signed by banks in relation to fossil fuels must be 4 to 1 by the year 2030; which means multiply and lots of current data. At the end of 2021, the ratio would be 0.8 versus 1.

According to the financial data agency, most of the world’s large banks would be far from these levels. JPMorgan, the largest underwriter of energy agreement operations, had a bank ratio of 0.7 in 2021. The data is slightly lower than that presented by Citigroup or Bank of America, but higher than Wells Fargo’s 0.4. BNP Paribas leads the ratio and is the entity among the main ones that achieves a higher ratio (1.7).

Since the signing of the Paris Agreement, according to Bloomberg, approximately $4.6 trillion in financing has been committed to hydrocarbon-focused companies, doubling the amount that renewable projects have received.

At this juncture, banks have been heavily criticized for their support of the fossil fuel industry. “We can still limit global warming to 1.5ºC but banks won’t get there unless they overhaul their lending and underwriting practices,” says Lucie Pinson, founder and director of environmental nonprofit Reclaim Finance.

In the report, BNEF reported the loans, bonds, shares and projects financed or intermediated for the energy sector and other relevant issuers. The analysis found that bank financing for energy supply rose to $1.9 trillion in 2021, of which $842 billion went to projects and low-carbon energy projects and companies, and $1.04 trillion to fossil fuels in 2021.

Nat West leads the list

Only one of the largest in the world has a ratio greater than 4.0 during the year analyzed. Britain’s NatWest reported a clean energy financing ratio of 5.5 compared to 0.3 for China Everbright, which leads the entities with the lowest ratio. Regionally, the US and China are far behind Europe.

And while North American banks accounted for the majority of energy supply financing, their average level was 0.6 at the end of 2021, compared to 2.6 for European institutions. In the case of the Chinese, the comparison falls to 0.6. This divergence reflects “the relative scarcity of investment in oil and gas in Europe and the historically favorable regulatory environment for investment in low-carbon energy,” according to the report.

Puck Henry
Puck Henry
Puck Henry is an editor for ePrimefeed covering all types of news.
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