US FOSSIL FUEL FINANCE

FT - May 13, 2024 - JPMorgan Chase, Mizuho and Bank of America were named as the biggest fossil fuel industry financers last year, in a report by climate campaigners which calculates the world’s biggest banks have provided a total $6.9tn to the sector in the eight years since the Paris climate accord.

The 15th annual report, produced by a coalition of campaign groups co-ordinated by the Rainforest Action Network, found the world’s 60 largest lenders had provided around $705bn in financing in 2023 alone.

In overall trends, finance related to gas-fired power, Arctic oil and gas, and ultra deepwater oil and gas projects fell last year, while it increased for companies focused on LNG.

JPMorgan had committed $40.8bn to fossil fuel companies in 2023, making the US bank the leading lender both for the year and since the Paris agreement, according to the report.

The International Energy Agency said three years ago there could be no new oil, gas and coal development if the world was to reach net zero emissions by 2050 to curb global warming in line with the Paris agreement.

The largest funder of companies expanding fossil fuel projects in 2023 was also JPMorgan, while Citi ranked first over the period since the Paris agreement despite its financing being lower in the past two years.

JPMorgan said it was one of the world’s largest financiers to both traditional and clean energy companies. It said this year it would disclose a ratio to show the proportion of low-carbon energy financing compared to fossil fuel energy financing, a move that the New York City comptroller had requested on behalf of pensions it manages.

“We believe our data reflects our activities more comprehensively and accurately than estimates by third parties,” JPMorgan said.

Bank of America also pointed to its lending ratio on clean energy versus fossil fuels, saying that BloombergNEF data showed it leading among its US peers on that basis. “We are engaged with clients across the energy spectrum to help them with their energy transition goals,” it said.

The RAN report noted that some banks had rolled back on green measures, however, including Bank of America which had dropped its exclusions on Arctic drilling, thermal coal, and coal-fired power plants.

The bank said it had “clarified” its process, but its “assessment of the need for enhanced due diligence because of the higher risks of doing business in certain areas remains unchanged”.

Citi said it was committed to the global transition to a low-carbon economy and supporting clients as they decarbonise, while meeting the need “for energy security, affordability and reliability.”

Since 2020 it had reached $441bn towards a $1tn sustainable finance goal, it said, and disclosed progress towards net zero in its annual report.

Chinese banks dominated financing for coal mining and coal-fired power in 2023, the RAN report found, while Canadian banks topped for tar sands oil.

Japan’s Mizuho declined to comment, but the data indicated that it had expanded finance related to the buildout of methane gas infrastructure, in line with national government policies.

In Europe, Barclays ranked as the biggest fossil fuels financier both in 2023 and since the Paris agreement, but said it had a target to provide $1tn in sustainable and transition finance by 2030.

This would be focused on “diversified energy companies investing in low-carbon and with greater scrutiny on those engaged in developing new oil and gas projects”.

Barclays said its financed emissions for the energy sector had been reduced by 44 per cent between 2020 and 2023, exceeding its 2030 target.

The UK-based bank also took issue with the methodology for the latest RAN report, saying it appeared the figures captured all general corporate finance provided to a company and attributed it based on revenue streams, rather than the use of proceeds.

The report’s authors disclosed the change in methodology in 2023 to take into account banks’ participation in corporate finance deals, including bonds, loans, and share issuances, even if the bank was not the main bookrunner.

This used a formula developed by research company Profundo. The previous reports relied on credit rankings calculated by Bloomberg as the data provider.

The authors said the change had been made to cover all bank financing, and to ensure a better global picture. Bloomberg was an industry standard data source in North America but not in all other markets, they noted.

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