Article – The world’s largest financial institutions have significantly increased their support for fossil fuel expansion in 2024, undermining their own climate commitments and potentially jeopardizing global temperature goals. According to new research from the Banking on Climate Chaos coalition, bank financing for fossil fuel companies has surged by 21% in the first half of this year compared to the same period in 2023.
JP Morgan Chase remains the leading financier, providing over $12 billion to fossil fuel developers between January and June, while Citigroup and Bank of America each contributed approximately $9 billion. These figures represent a troubling acceleration at a time when climate scientists warn that rapid decarbonization is essential to prevent catastrophic warming.
“We’re witnessing a dangerous disconnect between banks’ public climate rhetoric and their actual financing activities,” says Sarah Johnson, climate finance analyst at the Sierra Club, one of the organizations behind the report. “The numbers simply don’t align with what’s needed to meet the Paris Agreement goals.”
The financing surge comes despite recent pledges from many of these same institutions to align their portfolios with net-zero emissions targets. At last year’s COP28 climate summit, over 300 financial institutions committed to transitioning their portfolios away from carbon-intensive investments. This apparent contradiction has intensified criticism from environmental groups and raised questions about the sincerity of bank climate commitments.
Financial Times analysis shows that much of the increased funding is flowing toward expansion projects in regions with weaker environmental regulations. Particularly concerning is the $38 billion directed toward liquefied natural gas (LNG) infrastructure across Asia and Africa, where regulatory oversight is often less stringent than in Europe or North America.
The banking industry defends these investments, arguing that natural gas serves as an essential “bridge fuel” in the energy transition. “We’re supporting a managed transition that recognizes the continuing role of fossil fuels while building the clean energy economy,” stated Michael Reynolds, head of sustainable finance at a major European bank, speaking on condition of anonymity due to the sensitivity of the topic.
Climate experts remain unconvinced. The International Energy Agency has explicitly stated that no new fossil fuel infrastructure can be developed if the world is to limit warming to 1.5 degrees Celsius above pre-industrial levels. Dr. Emily Chen from the Climate Policy Initiative notes, “These financing decisions today lock in emissions for decades. Banks are essentially betting against the Paris Agreement.”
The report’s timing is particularly significant as financial regulators in the U.S., EU, and UK intensify their scrutiny of climate-related financial risks. The U.S. Securities and Exchange Commission recently finalized rules requiring publicly traded companies to disclose their climate risks, while the European Central Bank has begun incorporating climate considerations into its supervisory framework.
Federal Reserve data indicates that U.S. banks hold approximately $570 billion in fossil fuel assets, representing a substantial risk if these investments become “stranded” in a rapid transition to clean energy. Recent stress tests by the Bank of England suggested that some financial institutions could face losses of up to 15% on their fossil fuel portfolios under certain transition scenarios.
Market analysts note that banks are capitalizing on near-term profit opportunities while hedging against potential regulatory changes. “There’s a race to finance these projects before the regulatory environment tightens further,” explains Marcus Williams, energy finance specialist at Bloomberg Intelligence. “The returns are attractive now, but the long-term risk profile is becoming increasingly concerning.”
The report also highlights a geographical shift in financing patterns. While European banks have reduced their fossil fuel exposure by approximately 8% this year, North American and Asian institutions have increased theirs by 24% and 31% respectively. This suggests that climate finance policies are developing unevenly across regions, potentially creating regulatory arbitrage opportunities.
For investors, these trends present both opportunities and risks. The fossil fuel sector has delivered strong returns in recent quarters, buoyed by high energy prices and geopolitical tensions. However, the long-term outlook remains highly uncertain as renewable energy costs continue to fall and climate policies evolve.
“Smart money is increasingly recognizing that today’s fossil fuel investments may become tomorrow’s stranded assets,” says Rebecca Martinez, sustainable investment strategist at Goldman Sachs. “The transition timeline is the key variable – and banks appear to be betting on a slower transition than what science indicates is necessary.”
The findings come as shareholders increase pressure on banks to align their financing activities with climate goals. Climate-related shareholder resolutions reached record levels during the 2024 proxy season, with several major banks facing votes demanding greater transparency and more ambitious emissions reduction targets.
As world leaders prepare for this year’s COP29 climate summit in Azerbaijan, the banking sector’s fossil fuel financing will likely face intensified scrutiny. The gap between climate commitments and actual financing decisions remains a central challenge in addressing global warming – one that investors, regulators, and the public are increasingly unwilling to ignore.
