Banks must stop funding new fossil fuel projects and phase out current production as fast as possible

With the planet on fire already, the failure to include a moratorium on all new fossil fuel investments in the UN’s new climate initiative is disastrous

‘Pouring billions of pounds of investment into new fossil fuels could be devastating for humanity’ (Getty Images/iStockphoto)

A crucial word was missing from the United Nations Environment Programme Finance Initiative called Glasgow Financial Alliance for Net Zero, announced the day before Biden’s Earth Day summit.

There was zero mention of a “moratorium” on new coal, oil or gas investments.

The Climate Lead for United Nations Environment Programme Finance Initiative (UNEPFI) Kai Remco Fischer and their consultant, Sarah Kemmitt, kindly agreed to discuss the initiative’s merits with me. It felt like two real worlds colliding.

They were trying to get hugely damaging but highly profitable fossil-fuel banks to the negotiating table to phase out fossil-fuel investments and invest in the green economy instead. I was in the campaigners’ world, where science says that we have already burnt too much fossil fuel, with a banking sector that invested $3.8 trillion (£2.7 trillion)in fossil fuel projects, over the last five years.

Fischer and Kemmitt were naturally proud that they got some of the largest banks to the negotiating table and got them to sign up to 2050 net-zero carbon targets and 2030 interim targets also. These targets have to be in line with the 1.5C targets set by the Paris Treaty.

They were also proud that the banks will have to report annually on their absolute emissions for their clients and sector-specific emission intensity. Fischer said: “Disclosures going forward are about sheer emissions (as an environmental impact), not about the ‘financial risks’ from such environmental impacts, which can be a lot less tangible”.  

Last year I wrote that the UN Conference of the Parties climate summits fail because there are no banking, media or oil corporation summits taking place parallel to the governmental summit, so surely I should be delighted with this new UNEPFI initiative launched as part of the road to the November summit?

The problem is that loopholes in the agreement allow for investments to continue in new fossil-fuel projects. It could be interpreted that UNEPFI is unintentionally allowing some banks to engage in greenwashing.

If the banks are serious about the climate emergency, the basic first step is for them to stop funding new fossil fuel projects and phase out current production as fast as possible.

The European Investment Bank understands this and has imposed such a ban on all new coal, oil and gas investments from the end of 2021. The UNEP representative argued that the compulsory guidelines on targets, requiring investments to be in line with the Paris Treaty, was de facto a moratorium. I asked why, if the moratorium was implicit, did the agreement not make it explicit?

I promised to contact four of the major UK banks that have signed up to the Glasgow Financial Alliance for Net Zero, (Barclays, HSBC, Santander & Lloyds) and ask if they understood that science-based targets would exclude all new fossil fuel investments. Barclays and HSBC are, according to a RAN report, in the top 13 worst fossil fuel investing banking corporations in the world. Only HSBC responded with this non-committal answer:

“HSBC has set an ambition to align its provision of finance with the Paris Agreement goals, to achieve net zero financed emissions by 2050. We plan to use science-based scenarios that follow 1.5 degrees Celsius warming pathways, and which are not overly reliant on negative emissions technologies, to assess alignment of our financing activities.”

There were other potential loopholes in the GFANZ rules that I argued allowed the banks to continue investing in fossil fuels. They allow them to choose either absolute carbon emissions or sector-specific “intensity” targets. Intensity is the jargon used to measure carbon emissions per unit of output. Allowing banks to use this target, means a sector could lower their emissions per unit but hugely increase their output and so actual carbon emissions would rise but remain within the guidelines.

For example, aviation has significantly reduced carbon emissions per passenger (i.e. their intensity per unit) by buying more fuel-efficient planes but overall actual carbon emissions soared as flying thus became cheaper and millions more flew.

They flinched when I mentioned that Mark Carney, the new chair of GFANZ, is a vice-chair of Brookfield Asset Management, which reportedly has billions of investments in shale oil, coal and gas.

I was shocked to hear Carney introduce a speaker from Morgan Stanley at the GFANZ launch saying “Morgan Stanley are at the forefront of sustainability finance”. According to the RAN report Morgan Stanley has been in the top dozen fossil-fuel funders in the world over the last five years, with over $110 billion (£78 billion)of investments.

When I attend climate finance press conferences, I am repeatedly faced with some of the worst-offending banks lecturing us from the podium. They get a seat at all the top climate negotiations but civil-society groups challenging the banks’ destructive investments are often absent.

The UNEPFI is to be praised for getting these banks to the negotiating table and getting frameworks in place for targets and future reporting.  But with a planet on fire already, the failure to include a moratorium on all new fossil fuel investments is disastrous.

My conclusion from my meeting is that paradoxically such initiatives can simultaneously be modest steps forward, but also potentially provide greenwashing in the short term.

Pressure globally now needs to be placed on all the relevant players in the lead up to Cop26 to instate that word “moratorium” into the GFANZ agreement.

Or better still, get governments at Cop26 to agree that their central banks will impose the moratorium. Allowing the banks to continue to pour billions into new fossil fuels would be devastating to humanity.