Despite investor and societal pressure, banks worldwide continue to lend money and underwrite bonds issued by oil, gas, and coal companies, with bond deals in fossil fuels arranged by banks at nearly $250 billion in 2021, Bloomberg data showed on Monday.
JP Morgan financed the largest volume of loans and bonds combined so far this year, followed by Wells Fargo, Citi, RBC, and Mitsubishi UFJ, data as of December 3 compiled by Bloomberg showed.
Wells Fargo has been the biggest lender to the fossil fuel industry this year, with most of its exposure to the sector going to loans for companies.
While environment-conscious investors push for Wall Street banks—and all banks globally as a matter of fact—to shun fossil fuels, major banks say that by continuing to finance oil and gas, they help the sector invest in low-carbon energy solutions that would help decarbonize the global energy system.
“It is really important that our clients take steps to innovate and decarbonize, but we also need to bring capital to the table for the commercialization of those solutions,” Marisa Buchanan, Global Head of Sustainability at JPMorgan Chase & Co, told Bloomberg.
In May this year, UN Secretary-General António Guterres’ said that banks should finance low-carbon climate-resilient projects, not big fossil fuel infrastructure that is not even cost-effective anymore.
“We can no longer afford big fossil fuel infrastructure anywhere. Such investments simply deepen our predicament. They are not even cost-effective,” Guterres’ said in his speech at the 2021 Petersberg Climate Dialogue.
In October this year, rating agency Moody’s Investors Service said in a report that across the G-20 nations, financial firms hold $22 trillion in loans and investments subject to carbon transition risk.
“Financial firms adopting a rapid but predictable shift towards climate-friendly finance will best preserve their credit quality,” Moody’s said.