The news: US banks remained major financiers of fossil fuel projects in 2022, though Canadian banks are quickly catching up, according to The Rainforest Action Network’s Banking on Climate Chaos report. But despite the still-large sums directed to fossil fuels, banks are beginning to cut back, per Banking Dive.
Fossil fuel financing in review: In 2022, oil and gas companies reported nearly $4 trillion in profits, thanks to the geopolitical tension in Ukraine and the resulting energy crisis. But those profits didn’t slow down banks’ fossil fuel financing—which amounted to $673 billion, according to the report.
A blind eye toward progress: Climate activists are quick to point out that all of the US banks financing fossil fuel projects are members of the Net-Zero Banking Alliance, and that Canada was an original signer of the 2015 Paris Climate Agreement. But they don’t always emphasize the reductions banks in the US and Canada have made so far.
Climate activists claim, however, that the reductions occurred not due to actions taken by the banks, but because the record profits gas and oil companies enjoyed meant they didn’t need as much financing.
A sticky situation: Banks in both countries are performing a balancing act between fossil fuel financing and climate change. The pledges they’ve made toward climate change sometimes risk future business and economic growth.
Our take: The transition to stopping all new investments in fossil fuels and fossil fuel divestment is going to take time, and the impacts of the transition will likely affect more than the climate.
This article originally appeared in Insider Intelligence’s Banking Innovation Briefing—a daily recap of top stories reshaping the banking industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.
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