Fossil fuel lending under scrutiny by Nordic banking institutions
In a concerning development, several major banks are continuing to fund oil, gas, and coal operations, despite their commitments to the Net-Zero Banking Alliance (NZBA) and the Paris Agreement.
Among the projects being funded are oil exploration activities in the sensitive Arctic ecosystems, the expansion of a coal mine in the Czech Republic, which could lead to the emission of at least 60 million additional tonnes of CO2e, and the controversial East African Crude Oil Pipeline (EACOP), which could force 100,000 people to leave their homes or farmland and destroy habitats for endangered species.
DNB, Norway's largest bank, and Swedish SEB, members of the NZBA, account for 95% of the total loans granted to fossil fuel expanders. These banks, along with others, have invested around $6bn in fossil fuel companies planning to expand their production of oil, coal, and gas.
The NZBA's target is to reach net-zero emissions by 2050, permitting continued emissions and fossil fuel financing for years to come, compensated partly through offset schemes. Critics argue that this approach allows banks to keep funding fossil fuels in the short term.
Moreover, the NZBA has not mandated member banks to immediately cease all fossil fuel financing, especially for oil and gas, though it is generally accepted that coal financing should end sooner. This creates a "grey area" leading many banks to continue funding fossil fuel expansion temporarily.
Major banks such as HSBC, Barclays, JPMorgan Chase, Bank of America, and Morgan Stanley have exited or distanced themselves from the NZBA, citing the alliance’s weakening membership, questioned relevance, and lack of updated target-setting approaches. This reduces collective pressure on banks to fully divest fossil fuel financing.
Some banks emphasize their sustainable finance goals and investments in low-carbon transition while simultaneously increasing their fossil fuel financing volume, causing criticism from environmental groups and highlighting the contradiction between stated net-zero commitments and ongoing fossil fuel funding.
Nordea, a member of the NZBA Steering Group, alone has lent more than $400m to the coal industry. The report's authors state that there is no room for new coal, oil, and gas in a 1.5°C world. Japan's second-largest bank, Sumitomo Mitsui Financial Group, has also announced its exit from the NZBA.
To address these concerns, climate advocates demand greater immediate action and clear fossil fuel exclusion policies from the NZBA members. Banks should require their remaining clients in the coal, oil, and gas sectors to immediately publish Paris-aligned fossil fuel phase-out plans and withdraw finance and investments from any company that fails to do so. This revision could make it even harder for investors to hold banks accountable for fossil fuel financing.
[1] Fossil Fuel Finance Report 2021, Rainforest Action Network [2] Banking on Climate Change 2021, Rainforest Action Network [3] Climate Action 100+ 2021 Progress Report [4] BankTrack, ShareAction, and Reclaim Finance, The Net-Zero Banking Alliance: A Critical Assessment [5] Banking on Climate Change 2020, Rainforest Action Network
- The environmental-science community is alarmed by the funding of oil, gas, and coal operations by major banks, such as DNB and SEB, despite their commitments to the Net-Zero Banking Alliance (NZBA) and the Paris Agreement.
- The expansion of fossil fuel industries, like oil exploration in the Arctic and coal mines in the Czech Republic, could hinder progress in achieving climate-change mitigation goals and contribute significantly to carbon emissions.
- Financial institutions, including HSBC, Barclays, JPMorgan Chase, Bank of America, and Morgan Stanley, are facing criticism for their investments in fossil fuels, even as they promote sustainable finance and energy transition efforts, contradicting their stated net-zero commitments.
