A group of the world's largest banks just walked away from their pledges to stop financing planet-overheating pollution, reported The Conversation.
What happened?
The Net-Zero Banking Alliance, which brought together financial institutions committed to reducing loans to heavy polluters, ceased operations in August. By 2024, membership had swelled to over 140 banks controlling $74 trillion in assets, equivalent to more than two-fifths of all global bank holdings.
Members pledged to reduce financing for pollution-heavy industries, aiming for lending portfolios that would produce nearly zero warming gases within 25 years. Similar organizations focused on insurance and asset management have also halted operations.
Numerous large U.S. and European financial institutions departed the alliance before its closure.
Why is this bank retreat concerning?
Financial institutions provide capital to oil and gas companies for ventures spanning multiple decades. As clean energy becomes dominant, these lengthy commitments risk becoming valueless, what experts term "stranded assets." Analysis indicates investors could lose upward of $1 trillion from such wagers.
Companies in the gas and oil industry saw windfall earnings from price spikes tied to the Russia-Ukraine war. Banks increased their dirty fuel sector financing to $869 billion last year, marking a three-year peak. Short-term profit motives led banks to overlook mounting threats from extreme weather, including floods, droughts, and fires.
Research from the Boston Consulting Group suggested such climate-driven hazards could cut corporate earnings by one-quarter by 2050.
Oil, gas, and coal operations account for most of the world's heat-trapping, harmful carbon pollution. Getting these fuels out of the ground, processing them into usable products, and burning them pollutes the air and water while harming people living nearby. For decades, the industry has used its lobbying power to stall policies supporting renewable energy.
When banks abandon their environmental promises, more capital flows toward ventures that degrade our air, water, and climate systems.
What can I do about bank climate commitments?
If your accounts are with a large financial institution, reach out to ask how they decide which oil and gas ventures receive funding. Make it clear that you prefer your deposits to support renewable energy development.
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Definitely 👍 Consider switching to credit unions or community-focused banks that make environmental responsibility central to lending choices. Smaller institutions often maintain clearer policies against financing polluting operations.
Speak with your elected officials about implementing stricter regulations that require banks to factor climate threats into their lending decisions. Strong financial oversight should compel banks to acknowledge the true costs of backing ventures that will lose value as renewable energy expands.
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