Date Posted: 2025-08-28 15:58:21 | Video Duration: 00:15:26
Climate change and its far-reaching impacts can be likened to a towering structure, where threats such as species extinction, food shortages, and mass migration form the topmost layers. The layers beneath are composed of the various ways carbon accumulates in the atmosphere, primarily through the burning of fossil fuels. However, at the very foundation, supporting the entire structure, are the banks that finance these fossil fuel companies.
Fossil fuel companies rely heavily on banks for capital to finance their costly operations, such as finding, extracting, refining, and transporting these fuels. Despite their eco-friendly advertisements and net-zero targets, many banks continue to fund the fossil fuel industry. According to the “Banking on Climate Chaos” report, the world’s 65 largest banks have funneled nearly $7.9 trillion into this industry since the Paris Agreement in 2016, with $869 billion provided just last year.
This financial support has enabled the expansion of fossil fuel extraction, resulting in increased carbon emissions and global warming. Ironically, these same banks often claim to have eco-credentials and net-zero targets. The discrepancy lies in their failure to account for scope 3 emissions, which include the indirect emissions from the companies they finance. The gold standard for net-zero targets should encompass all emissions scopes, including these indirect ones.
Bristol Airport, for example, aims for net-zero operations by 2030, focusing on scope 1 and 2 emissions—those they directly control. However, the majority of emissions are from the planes using the airport. Banks, unlike Bristol Airport, have the capacity to incorporate scope 3 emissions into their net-zero policies but often choose not to, thus enabling them to overlook the emissions of the fossil fuel companies they finance.
The International Energy Agency (IEA) has stated that no new fossil fuel projects are necessary for achieving net-zero by 2050. Existing projects provide sufficient energy to transition to a clean economy. Yet, last year, 48 out of the 65 biggest banks increased their financing for fossil fuel expansion, contributing to additional carbon emissions and further warming.
While banks have increased investments in clean energy—currently twice as much as in fossil fuels—this only benefits the environment if clean energy displaces fossil fuels. Continued financing of fossil fuel expansion prolongs their presence in the energy mix, locking in more emissions. To effectively reduce fossil fuel dependence, banks should halt financing for their expansion and adhere to robust net-zero strategies, including scope 3 emissions.
Just 12 banks control the majority of fossil fuel financing, and policy changes in just five countries could significantly reduce global fossil financing. However, the United States, representing a third of this finance, poses a challenge due to its political climate and ties to the fossil fuel industry. While American banks may not adopt these policies, pressure on individual banks and targeting national financial regulators in other countries could drive change.
Banks are aware of the realities of climate change and the risks it poses to their operations. JP Morgan Chase, the largest financier of fossil fuels, acknowledges this in their reports. Nevertheless, their actions continue to contribute to the problem. If banks do not regulate themselves to mitigate climate change, external pressure and policy enforcement may be necessary to prompt them to act responsibly.