Clean energy may be poised to attract double the investments of fossil fuels this year, but the powerful banking sector is still betting that there is lots of profit to be made in oil, gas and coal. A comprehensive report released today shows that after two years of decline in fossil fuel financing, the global banking industry reversed course in 2024, sharply increasing fossil loans and underwriting.
The turnaround is dramatic. After a previous high of $922 billion in fossil financing in 2021, lending and underwriting to the industry fell to $787 billion in 2022 and then again, in 2023, to $707 billion. Last year, this downward trend reversed, and financing increased to $869 billion, according to the report, Banking on Climate Chaos (BOCC). (All figures in U.S. dollars.)
Jessye Waxman, senior adviser for sustainable finance for the U.S.-based Sierra Club, one of the report’s partner organizations, said strong oil and gas production and weak economic conditions sent fossil fuel prices lower last year, creating a need for greater external financing. At the same time, lower interest rates made it more attractive for fossil fuel companies to seek bank financing. “The fossil fuel industry is really trying to shoehorn their way in, trying to push out alternative energy sources and so are looking for external funding to help their expansion,” she said in a BOCC press briefing.
The report, prepared by the Rainforest Action Network with other climate advocacy organizations, is an annual assessment of fossil fuel financing by the world’s 65 largest banks.
The ramp-up has come at a time when the International Energy Agency (IEA) forecasts that investment in clean technologies (renewables, nuclear, grids, storage, low-emission fuels, efficiency and electrification) is on course to reach $2.2 trillion in 2025, double the investment in oil, natural gas and coal at $1.1 trillion. The increase is due to the cost advantage of green energy as well as concerns over climate change and energy security. A decade ago, fossil fuels attracted 30% more investment than clean energy, the IEA said in its annual World Energy Report.
Yet, 45 of the 65 banks covered in the BOCC report increased their fossil fuel financing in 2024. The United States was the largest region for fossil financing at 33% of the global total, and Canada was second largest at 15%, a reflection of the large size of the North American oil and gas industry and the close ties between the industry and the North American banks.
JPMorgan Chase financing up 39%
JPMorgan Chase, the largest bank in the United States, was the top fossil fuel bank in the world, with $53.4 billion in oil, gas and coal financing in 2024, an increase of 39% from a year earlier. Bank of America, the second-largest fossil fuel bank, increased its fossil commitments to $46 billion, 38% more than in 2023. Third-ranked Citigroup had $44.7 billion in fossil financing, nearly 50% higher than the previous year.
Among Canadian banks, Royal Bank of Canada was ranked eighth highest at $34.3 billion in fossil fuel financing, 16% higher than in 2023. Toronto-Dominion Bank was ninth at $29 billion, 45% higher than in 2023.
Several large and expanding energy companies have consumed significant shares of the banks’ fossil financing. These include Diamondback Energy, a major Texas-based oil and gas developer, and Enbridge, a large oil transporter and North America’s largest gas utility. Three other companies are among the banks’ top five fossil fuel clients: State Grid Corporation of China, developing large coal power plants; Saudi Aramco, the largest oil producer in the world; and BP, a leading oil and gas supplier.
The report looks only at fossil fuel lending and underwriting and does not include low-carbon financing, which has also been increasing in recent years. For example, JPMorgan Chase estimates that in 2023 it provided more funding to clean energy than to oil, gas and coal, providing $1.29 in green energy for every dollar in fossil fuels.
But it’s not clear whether that ratio will increase or decrease in 2024 given the sharp rise in fossil financing last year. And even if clean energy finance improves marginally, JPMorgan Chase’s energy supply ratio (the clean-to-fossil-energy financing metric) of 1.29:1 is significantly below the 4:1 clean/fossil level that BloombergNEF has established as the level needed worldwide for the climate to stay within 1.5°C of global warming. JP Morgan did not respond to a request for comment from Corporate Knights.
No new fossil investment needed
The BOCC report authors maintain that no new oil, gas or coal financing is needed. They point to a 2021 IEA assessment that there should be no new investments in fossil fuel projects if the world is to limit global warming to 1.5°C. Recently, the IEA has revised its position, saying that new investment is needed in existing infrastructure to replace declining production but that new fossil infrastructure is still not needed.
Bank financing of fossil fuels is expected to become even more contentious in coming years. In the last six months, all major U.S. and Canadian banks have left the Net-Zero Banking Alliance, the global climate coalition. Political conditions have also changed with U.S. President Donald Trump’s call for fossil fuel companies to “drill, baby, drill” and Canadian Prime Minister Mark Carney pushing for Canada to become a clean and conventional energy superpower.
This has set the stage for a new round of oil, gas and coal expansion. The BOCC report estimates that companies engaged in fossil fuel expansion received $429 billion in 2024, an $84-billion increase from 2023 and about half the total fossil financing of $869 billion.
The BOCC authors say this expansion is reckless for global warming and increases the risk that banks will be left holding loans and bonds on declining fossil fuel assets. They are calling on regulators to require banks to establish climate plans limiting oil, gas and coal financing.
“To see the numbers jump so high just means that the financial sector is at odds with the [climate] commitments that world governments have made,” says Allison Fajans-Turner, head of bank policy for the Rainforest Action Network. “They are still prioritizing short-term profits over the long-term stability of the financial system.”
Eugene Ellmen writes on sustainable business and finance. He is a former executive director of the Canadian Social Investment Organization (now the Responsible Investment Association).
