We know that UK banks and asset managers like Barclays and HSBC are fuelling the climate crisis by financing polluting companies. Now new analysis exposes just how much the finance sector is in for. Spoiler: it’s massive.
In 2019, the City was responsible for 805 million tonnes of CO2 emissions. To put that into perspective, that’s bigger than most countries. If the City were a country, it would rank ninth, ahead of Germany and even Canada, which has a huge oil and gas industry.
It’s not a like-for-like comparison, but it demonstrates the sheer scale of the finance sector’s culpability in the climate crisis. And it’s probably even bigger than that.
Only data from a select number of the most significant financial companies were analysed – just 15 banks and 10 asset managers. And although researchers used the most established method for assessing emissions, there are gaps in what it covers so not everything could be accounted for.
Even so, the report – produced by Greenpeace and WWF – is the first attempt to quantify the true extent of the City’s role in the climate crisis. Pumping money into highly-polluting industries means banks and asset managers are just as responsible as the oil, coal and intensive agriculture companies for global heating.
Some financial companies are producing so-called net-zero carbon plans, but in general they’re woeful. The plan from Barclays is lacking in substance and, more importantly, any commitment to ending fossil fuel financing. The bank also recommended that shareholders vote against a climate resolution at the recent AGM.
HSBC has done somewhat better by proposing dates for the end of coal financing, but that’s not yet a commitment – it goes to a vote at HSBC’s shareholder meeting later this week. But this proposal doesn’t cover its asset management arm, which has stakes in companies constructing more than 70 new coal plants in Asia and Africa.
The problem is, all these climate plans are produced voluntarily, and are subject to the whims of executives and investors. So it’s perhaps no surprise they fall far short of what’s required to meet the goals of the Paris Agreement. No one is forcing banks to do anything on reducing emissions from their loans and investments, so they’re doing the bare minimum they think they can get away with.
To bring the City in line with the Paris agreement goals, it’s going to take legislation. Only then will they be forced to move with the speed and scope required to keep global temperature increases below 1.5ºC.
This would be in line with the government’s apparent agenda. Its recent commitment to set more ambitious emission reduction targets in law suggests it should also be keen to set legal requirements for financing oil, coal and other polluting industries.
And last week, the International Energy Authority – previously a champion of fossil fuels – said there should be no new oil, coal or gas starting right now. The IEA is a major influence in the energy sector, so this announcement should carry a lot of weight. It also removes another justification for continued investment in fossil fuels.
So all eyes are on the government and the chancellor Rishi Sunak in particular. He can bring forward the legislation needed to force banks and asset managers to move loans and investments away from high-carbon industries.