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Big banks see major potential in new investments after raking in profits from unexpected source — but critics are still concerned

Experts also said that more regulations are needed to ensure the investments are paying off in practice as planned.

Experts also said that more regulations are needed to ensure the investments are paying off in practice as planned.

Photo Credit: iStock

Global investors are starting to rake in profits from financing planet-friendly projects as part of a trend that demonstrates a strong return on investment in the sector. 

In fact, for the second consecutive year, CleanTechnica reported that banks made more money by financing “green projects” — including earning from bond and loan fees — than from dirty energy transactions. 

The world’s largest lenders racked up $3 billion in fees last year from deals billed as being good for the planet. Comparatively, financing the dirty energy sector generated $2.7 billion, per CleanTechnica, referencing a Bloomberg report

The profits bode well for confidence in the clean enterprise sector. Europe was a leader, with the European Union’s BNP Paribas hauling in nearly $130 million from financing, CleanTechnica reported

What’s more, United Kingdom-based financial data and analytics firm FTSE Russell’s experts reported recently that 2023 marked an expansion and return to form for the global green economy.

Revenues for companies in the category are forecast to surpass $5 trillion by next year, per an FTSE report. It cited government policies, including the U.S. Inflation Reduction Act, as part of the reason for the solid performance. 

The path forward, however, isn’t without potential pitfalls. 

FTSE’s experts noted possible disruptions in global supply chains for valuable materials, such as the expensive metals needed for electric vehicle batteries, as a concern. 

And despite the record investments, some analysts said it’s not enough to prevent global average temperatures from exceeding preindustrial times (1850-1900) by 2.7 degrees Fahrenheit. That’s a threshold climate experts expect to result in severe environmental consequences if surpassed. BloombergNEF research suggests that by 2030 there needs to be a 4-to-1 low-carbon-to-dirty-fuel investment ratio to keep us below the mark. 

“Meaning for each dollar invested in fossil fuel energy supply, four would be invested in low-carbon energy supply,” per the BloombergNEF report. In 2022, the ratio was 0.9 to 1. 

“Banks still aren’t keeping pace with the rate of transition that’s required to avoid catastrophic climate change,” Jason Schwartz, a communications strategist with nonprofit The Sunrise Project, said in the CleanTechnica report

Experts also said that more regulations are needed to ensure the investments are paying off in practice as planned. This would help prevent so-called greenwashing, when companies tout planet-friendly policies but fail to fulfill the billing. It’s something even consumers can help to regulate, by holding companies accountable to their clean pledges. 

CleanTechnica’s takeaway on the topic seems to be a fair conclusion. The bankers are likely operating with profit as the guiding light, “[lending] money at the highest rate possible to people who have a better than even chance of paying it back,” per the report’s closing message. 

The win for the planet is that cleaner technology is proving to be a wise investment. 

“More than mandates, targets, or goals, that in itself will help the flow of capital to climate friendly ventures get larger over time,” CleanTechnica’s Steve Hanley wrote.

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