For the second year in a row, global banks made more money underwriting bonds and providing loans for green projects than they earned from financing oil, gas and coal activities, according to data compiled by Bloomberg.
The research showed that the world’s biggest lenders generated a total of about $3 billion in fees last year from organising debt for deals marketed as environmentally friendly. By contrast, the sector brought in less than $2.7 billion in aggregate earnings from fossil-fuel transactions.
European banks led the way, with BNP Paribas topping Bloomberg’s green debt league table. The French bank generated close to $130 million from its green finance business with Credit Agricole in second place at $96 million and HSBC Holdings in third on $94 million.
Wall Street banks, on the other hand, dominated fossil finance. Wells Fargo was out in front with fees of $107 million followed closely by JPMorgan and Mitsubishi UFJ Financial Group, both with $106 million. However MUFG was also last year’s top arranger of global green loans.
These trends are reflective of the regulatory environment in both regions. In Europe, both the European Central Bank and the region’s top banking authority have adopted a stricter approach, urging the finance industry to accelerate its green transition.
Lenders in Europe now face the threat of fines and higher capital requirements if they mismanage climate exposures. In response, many banks are imposing explicit restrictions on fossil finance.
In the US, there has been a backlash with many Republican states trying to obstruct the green transition.
Banks suspected of withholding financing from the oil and gas sector increasingly face retaliation, with Texas among states threatening to cut off Wall Street firms that embrace net zero emissions goals.
Given events, it is not surprising that the global finance industry has fallen well short of where it needs to be if the goals of the Paris climate agreement are to be met.
According to an analysis by BloombergNEF, four times as much capital needs to be allocated to green projects as to fossil fuels by 2030 to align with net zero emissions targets.
However, the figures show that at the end of 2022, that ratio was just 0.7 to 1, largely unchanged from the previous year.
Bank financing isn’t “anywhere close” to the transition levels needed, said Trina White, sustainable-finance analyst at BloombergNEF, when the December report was published.
© Markets Media Europe 2024
