A report released on Tuesday has shown that banks gave 81 cents in financing support to low carbon energy supply for every dollar they provided to fossil fuels in 2021 and they will need to ramp up their commitments much further for the world if the world was to hit its climate goals.
The world needs to be investing $4 in renewable energy for every $1 invested in fossil fuels by 2030 to be able to limit global temperature rises to 1.5 degrees Celsius above the pre-industrial average as several climate scenarios has suggested
The report was done by energy analysts BloombergNEF that compiled data from 1,142 banks for what it calls an “Energy Supply Banking Ratio” to assess whether banks are aligning their financing to the real economy and the 1.5 degrees target.
It found that in 2021, bank financing for energy supply totalled $1.9 trillion, just over $1 trillion of which went to fossil fuels and $842 billion to low carbon energy projects and companies.
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The bank financing ratio, of 81 cents to $1, was below the global energy supply investment ratio of 90 cents to $1 and the latter ratio has been climbing in recent years from around 0.45:1 between 2011 and 2015.
“While a bounce in fossil-fuel investment is expected to counter the disruption caused by Russia’s invasion of Ukraine, the underlying economics of low-carbon energy supply mean its growth will be sustained,” BloombergNEF CEO Jon Moore was quoted as saying, noting 2022’s 15% rise in low carbon energy supply investment.
According to BloombergNEF, individual banks’ financing ratios varied. For example, the Royal Bank of Canada had a 0.4 ratio and JP Morgan 0.7, against BNP Paribas’ 1.7 and Deutsche Bank’s 2.2, which said differences reflect geographic focus, client bases and strategies.
The report’s findings differ from another study published by environmental groups last month which said the share of bank financing going to renewables had stagnated and BloombergNEF has said its research covered financing from far more banks than other studies.
Story adapted from Reuters.
