REPORT: Climate crisis causes receive 20 times more funding than solutions

“As the climate crisis escalates, fossil fuels and industrial agriculture – the two industries that are the largest contributors to climate change – continue to expand and thrive. Meanwhile, the solutions needed to address the climate crisis remain woefully underfunded,” the report reads

London, UK | THE INDEPENDENT | The world’s top financial institutions and banks are fueling the climate change crisis by continuously funding the major causes of climate change than governments in the Global South are receiving as funding for climate solutions.

This is according to a new report titled How the Finance Flows: The Banks Fueling the Climate Crisis. The report by ActionAid International tracked financial flows from banks to fossil fuels and industrial agriculture in the 134 countries of the Global South which include regions of Africa, Latin America, Asia and Oceania.

The report shows that since the signing of the Paris Agreement in 2015, the world’s leading banks have allocated a remarkable USD 3.2 trillion to support the growth of fossil fuels, and an additional USD 370 billion has been directed towards industrial agriculture- the second most significant contributor to climate change.

The Agreement was initially designed to address climate change through mitigation, adaptation, and financial support. Under the Net-Zero Banking Alliance, a group of banks committed to aligning their lending and investment portfolios with net-zero emissions by 2050. However, the report indicates their public declarations, the scale of their continued fossil fuel and industrial agriculture financing is staggering and “none have adequate policies in place to genuinely de-carbonise”.

“As the climate crisis escalates, fossil fuels and industrial agriculture – the two industries that are the largest contributors to climate change – continue to expand and thrive. Meanwhile, the solutions needed to address the climate crisis remain woefully underfunded,” the report reads.

The report further highlights banks like Barclays, Citibank, JP Morgan Chase, Société Générale, Bank of America, Bank of China, HSBC, BNP Paribas, and the Industrial and Commercial Bank of China, among others, to be the top financiers to climate change causing projects which affect the poor countries.

“The financing provided for fossil fuels and industrial agriculture in the Global South is likely to dwarf the financing provided by banks for renewable energy and agro-ecology over the same period,” the report adds.

Teresa Anderson, the Global Lead on Climate Justice at ActionAid International and the author of the report emphasized that global banks frequently make public statements indicating their commitment to addressing climate change. However, she described the extent of their ongoing financial support for fossil fuels and industrial agriculture as nothing short of astonishing.

“…By financing fossil fuel and industrial agriculture in the Global South, banks are condemning communities to the cruel combination of landlessness, deforestation, water pollution and climate change. With this report, banks can no longer pretend that the issue is out of sight, out of mind,” he noted.

In the foreword of the report, Vanessa Nakate, a Ugandan climate change activist highlighted the ongoing flow of funds into activities that have a detrimental impact on the planet and its inhabitants. What particularly infuriates her is the apparent lack of decisive action being taken by world leaders and major polluters to address and mitigate this crisis.

“I’ve seen firsthand the devastation extreme weather can inflict on the lives of people who did very little to cause it, and this injustice is what spurs me on as a climate activist. You may have heard it time and time again, but we cannot wait any longer – the situation is desperate, and it’s time to expose the biggest contributors to this crisis,”

She added; “This report reveals the trillions in harmful finance flowing to the Global South, fueling the climate crisis and directly harming vulnerable communities. Above all, and crucially, it celebrates the climate heroines and heroes, the farmers and communities leading the way with agroecology and rooted resistance.”

Arthur Larok, the Secretary-General at ActionAid International, added that the significance of the new report should not be underestimated or overlooked by the banks that are providing funding to activities exacerbating the climate crisis. He pointed out that their financial resources are currently being directed in the wrong direction, which is a matter that cannot be ignored.

“The world’s money is flowing in the wrong direction – since the Paris Agreement, banks have provided 20 times more financing to fossil fuels and industrial agriculture activities in the Global South than Global North governments have provided as climate finance to countries on the front lines of the climate crisis. This is absurd and must stop.”

The Action Aid report comes at a time when world leaders have converged in Nairobi, Kenya at the Africa climate summit which is discussing among other climate change financing, to mitigate loss and damage caused by its impacts. In January, a Sierra Club research study revealed that a mere seven per cent of the funding from major international banks was allocated to renewable energy projects during the period from 2016 to 2022.

The Sierra Club report, which is also referenced in the Action Aid report, emphasized that investments in low-carbon energy sources must make up a significant portion, at least 80 per cent, of all energy investments, compared to fossil fuels by 2030 in order to effectively meet climate-related objectives and goals. The report advised banks to stop financing deforestation, coal, fossil fuel expansion, and harmful industrial agriculture projects immediately.

“Banks must strengthen policies against human rights abuses and deforestation to protect the rights of communities. National and regional governments must regulate the banking and finance sectors to stop the financing of fossil fuel expansion, and scale up support and planning for just transitions to real solutions such as renewable energy and agroecology,” reads the recommendation.

The Global South has a historical track record of lower greenhouse gas emissions, yet paradoxically, it is frequently the region most vulnerable to the impacts of climate change. For instance, the International Rescue Committee says seven out of the ten countries most susceptible to climate-related disasters are located in Africa, even though the entire African continent accounts for only 4 per cent of global carbon emissions.

Recently, there have been campaigns led by climate change activists to halt the financing of fossil fuel projects. One of the prominent global campaigns in this line is called #StopEACOP, which has been mobilizing efforts to discourage banks and insurers from funding the East African Crude Oil Pipeline (EACOP).

Through their calls, letters, lobbying efforts, and more, the activists have successfully influenced several banks and insurers to withdraw their support from the project. This collective action has had a significant impact on the timelines of Uganda’s flagship oil project.

****

URN