The world’s biggest banks have been urged to undertake a fundamental shift in their investment strategies amid accusations they are still funding the fossil fuel sector.
A new report from NGO ActionAid reveals the world’s banks including HSBC, Citigroup and Barclays are channelling, on average, 20 times more finance into the major causes of climate change than governments in the Global South are receiving as funding for climate solutions.
How the Finance Flows: the banks fuelling the climate crisis shows that bank financing provided to the fossil fuel industry in the Global South reached an estimated US$3.2 trillion in the seven years since the Paris Agreement on Climate Change was adopted, with $370 billion provided to the largest industrial agriculture companies operating in the Global South.
The report added the largest recipient of industrial agriculture financing in the Global South is Bayer which has received an estimated $20.6 billion in financing for its industrial agriculture operations in the Global South since 2016. Bayer is the world’s second largest producer of agrochemicals. ActionAid said fertilisers, pesticides and deforestation associated with Bayer’s products are major contributors to the greenhouse gas emissions that cause climate change.
Arthur Larok, secretary general at ActionAid International, said: “This report must not be ignored by the banks funding the climate crisis. The world’s money is flowing in the wrong direction – since the Paris Agreement, banks have provided 20 times more financing to fossil fuels and industrial agriculture activities in the Global South than Global North governments have provided as climate finance to countries on the front lines of the climate crisis. This is absurd and must stop.”
Teresa Anderson, Global Lead on Climate Justice at ActionAid International and author of the report, added: “Global banks often make public declarations that they are addressing climate change but the scale of their continued financing of fossil fuels and industrial agriculture is simply staggering. It is communities in Africa, Asia and Latin America who are suffering the impacts of decisions made in distant banking boardrooms. By financing fossil fuel and industrial agriculture in the Global South, banks are condemning communities to the cruel combination of landlessness, deforestation, water pollution and climate change. With this report, banks can no longer pretend that the issue is out of sight, out of mind.
Anderson added: “Banks need to own up to the harm that they are unleashing on the communities and the planet, and urgently stop financing the destruction wreaked by fossil fuels and industrial agriculture.”
“This report sets out the alternatives to these harmful practices. Solutions like renewable energy and agroecology are centred on real leadership from women and young people in the Global South, but they must be supported by progressive public financing,” ActionAid explained. “Agroecology describes farming and managing crops, livestock, forests and fisheries in a way that works with nature, avoids emissions, is resilient to climate change and sustainable, and offers various other environmental, social and cultural benefits such as addressing food and water scarcity, and poverty.”
The report’s recommendations include:
- Banks to immediately stop project and corporate financing for all new deforestation, coal and fossil fuel expansion activities, and rapidly phase out financing of all other fossil fuel and harmful industrial agriculture activities.
- Banks must strengthen polices against human rights abuses and deforestation to protect the rights of communities.
- National and regional governments must regulate the banking and finance sectors to stop the financing of fossil fuel expansion and scale up support and planning for just transitions to real solutions such as renewable energy and agroecology.