Daily Management Review

9% Drop In Lending To Fossil Fuel Industry By Major Banks In 2020


9% Drop In Lending To Fossil Fuel Industry By Major Banks In 2020
The covid-19 pandemic last year resulted in the biggest banks of the world cutting down by 9 per cent for projects involving fossil fuels even though that spending last year was still higher over the last a five year period according to a report published on Wednesday.
According to a report by Rainforest Action Network, Reclaim Finance, Oil Change International and other non-governmental organisations (NGOs), during the entire of 2020, more than $750 billion to 2,300 fossil fuel companies across the world were lent by the 60 largest banks of the world which was lower than the $824 billion that had been lent to fossil fuel projects in the previous year.
However the report also noted that the drop in investments was because of record levels of low investment within the wider energy industry during the second half of 2020 because of a slump in demand for fossil fuels due to the Covid-19 pandemic ripping through the world. That however followed a steady annual rise of between 4.4 per cent and 5.5 per cent every year since 2016 – the year when the Paris climate accord was signed that pledged to bring down carbon emissions to prevent adverse climatic events.
During the first half of 2020 however there was a surge in demand for debt from fossil fuel companies who took advantage of the low rates of interest and consequent cheap financing, the report said following its assessment of roles of the major banks in lending and underwriting debt and equity issues.
“Despite this significant drop from 2019 to 2020, the overall trend of the last five years is one heading definitively in the wrong direction,” the report said.
“We must go forward to a world where even without a pandemic, fossil fuel production declines almost as quickly every year for the next decade - as it did in 2020 — but this time in a managed way,” the report added.
There is increasing scrutiny from many fronts of the speed at which banks are lending to companies who are accused of generating heavy greenhouse gas emissions with investors of such banks pushing them to disclose more details about their plans to manage climate related risks and opportunities within their financing portfolios.
The latest major bank to concede to investor pressure this month was HSBC as the lender pledged to phase out support for the coal industry while also committing to short and medium term targets to align with the Paris Agreement.