Report Shows Increase in Bank Funding for Clean Energy
A report that came out recently says that in 2021, banks put 81 cents into low-carbon energy sources for every dollar they put into fossil fuels. However, despite this progress, banks will need to significantly increase their efforts to help the world achieve its climate targets.
Multiple climate scenarios indicate that to limit global temperature increases to 1.5 degrees Celsius above pre-industrial levels, the world must invest $4 in renewable energy for every $1 invested in fossil fuels by 2030.
BloombergNEF, an energy analyst, evaluated data from 1,142 banks to develop an "Energy Supply Banking Ratio," assessing whether banks are directing their financing towards the real economy and the 1.5-degree target.
According to the report, in 2021, banks provided a total of $1.9 trillion in financing for energy supply, with just over $1 trillion going to fossil fuels and $842 billion to low-carbon energy projects and companies.
The bank financing ratio, at 81 cents to $1, was lower than the global energy supply investment ratio of 90 cents to $1. The latter ratio has been steadily increasing in recent years, from around 0.45:1 between 2011 and 2015.
BloombergNEF CEO Jon Moore stated that while a rebound in fossil fuel investment is expected to counter the disruption caused by Russia's invasion of Ukraine, the underlying economics of the low-carbon energy supply will result in sustained growth. He noted a 15% increase in low-carbon energy supply investment in 2022.
The report revealed that individual banks' financing ratios varied. The Royal Bank of Canada had a 0.4 ratio, JP Morgan had 0.7, BNP Paribas had 1.7, and Deutsche Bank had 2.2. BloombergNEF stated that differences reflect geographic focus, client bases, and strategies. JP Morgan and RBC did not respond to requests for comment.
The report's findings differed from another study published by environmental groups last month, which suggested that the share of bank financing going to renewables had stagnated. However, BloombergNEF claimed that its research covered financing from a far larger number of banks than other studies.