What have banks got to do with climate change?
Most fossil fuel companies don’t have the billions in cash it takes to exploit, process, and transport fossil fuels without the support of big banks. Meanwhile most renewable energy companies have even less money than the fossil fuel companies and depend on banks to expand clean energy.
This means that banks are central to how quickly the urgently needed transition to clean energy can happen. If banks are serious about tackling climate change, they should be stepping up their investment in renewable energy on a massive scale, but at the moment most big banks are still investing more in fossil fuel companies and projects, driving climate breakdown.
The Banking on Climate Change 2019 report showed that 33 global banks financed fossil fuel companies to the tune of $1.9 trillion between 2016 and 2018. Just at the time when the world needs to rapidly phase out fossil fuels, these banks actually increased total yearly funding to them, from $612 billion in 2016 to $654 billion in 2018.
At the same time over 800 million people around the world don’t have access to electricity. Studies have demonstrated that the best way of providing electricity to them would be through renewable energy and yet a whole host of proposed renewable projects remain underfunded. It is estimated that the Global South will require around $4 trillion per year to develop the low-carbon clean infrastructure needed to meet the energy needs of local populations. Banks could be a part of the solution to both the climate crisis and energy poverty, but right now they are perpetuating the problem.
Why are you singling out HSBC?
We initially focused on the four biggest high street banks in the UK; RBS, Lloyds, Barclays and HSBC, as our research showed that none of these banks was doing enough to keep the world within the agreed temperature rises negotiated as part of the 2015 Paris Agreement - even though all four banks claimed to support the Paris Agreement.
Each of the banks has made some progress since we launched our campaign in September 2016, including limiting support for new coal, and committing to invest more money in clean energy. But there is so much more they could be doing. In the summer of 2018 we decided to focus the campaign on HSBC as it is Europe’s largest bank and the only one of the four UK banks to leave the door open to supporting new coal projects. We wanted to expose the chasm between HSBC’s stated commitment to tackling climate change and its actions, which simply do not line up with the challenge we face.
We continue to call for further action from the other big UK banks, especially Barclays, whose funding of fossil fuels is on a par with that of HSBC.
Do you really expect banks to care what I think?
Most high street banks claim to be driven by customer satisfaction. What their customers and potential customers want really matters to them, so we must make it clear we’re not satisfied with their current investment choices. This is particularly the case with HSBC which prides itself on its public image and its sustainable banking brand. If thousands of us ask the same questions of banks (as customers, potential customers or concerned citizens), we are more likely to be heard.
There are compelling financial reasons why banks should listen to us. The think-tank Carbon Tracker Initiative has highlighted the risk of ‘stranded assets’ – whereby the money currently invested in oil, gas and coal companies becomes worthless because governments take the necessary action to keep fossil fuels in the ground to meet climate commitments. Consequently, banks have both a financial and a moral imperative to draw up a timebound plan for how they will transition away from fossil fuels.
Are there enough renewable energy projects to invest in?
Yes. While we realise there are some challenges in scaling up investments in the relatively new renewable energy sector, we are asking banks to set targets for increasing investments in renewables over time, not overnight. The way in which banks finance fossil fuel companies cannot simply be copied for renewables. That’s why banks need to engage seriously with proper planning for a low-carbon future. Which is exactly what we’re asking for.
I don’t think I know enough about finance to talk about this issue!
Just as you don’t need to be a doctor to know that investing in tobacco firms is not good for people’s health, you don’t need to be an investment expert to know that financing fossil fuels is not good for our future. You don’t need to understand everything about global financial flows to understand that climate change is a risk to us all, a risk that is currently underestimated by our banks.
You don’t need to understand everything about the way that banks invest, lend or operate to raise the point that the people who manage our money should understand the extent to which climate change will affect their decisions. Climate scientists have proven the case beyond reasonable doubt. Our friends around the world living on the frontline of a changing climate have rightly demanded that we act. You know enough to heed that call.
Should I move my money to a different bank?
There are no major current account providers that are not in some way connected to the fossil fuel industry. We believe it is important to engage with the biggest banks to make sure they know how important this issue is. The big banks manage trillions of pounds between them, and the people managing this money must be aware of the risks and impacts of the decisions they make.
It is important that ‘green’ finance is not confined to a niche alternative investment opportunity, but becomes the norm for mainstream banks because they all understand the risks of financing fossil fuels and the opportunities of financing clean energy.
If you do decide to move your account, make sure that you tell your current provider why you have taken this decision. It’s important that they hear that climate change is an issue that is important in consumer decision making.
Shouldn’t the government just regulate the banks better?
Alongside our campaign to UK banks, we are also campaigning for more ambitious government action to make sure that the UK becomes a net zero contributor of greenhouse gases before 2045. This will require direct action from all government departments, and new regulations in various sectors of the economy.
If the banks fail to make fast enough progress through their own voluntary actions, then we believe that the Government and global financial regulatory bodies must introduce new laws and measures to regulate bank loans and ensure that their actions are helping rather than hindering efforts to prevent climate breakdown.