NGO suggests at least a third of GFANZ members are not on track to reach net zero emissions by 2050.
Less than 4% of major financial institutions (FIs) have adopted policies preventing the funding of oil and gas expansion, according to an update of NGO Reclaim Finance’s Oil and Gas Policy Tracker (OGPT).
Launched in March 2020, the OGPT initially tracked 150 of the world’s largest FIs, analysing and rating oil and gas exclusion policies based on science-based indicators. These consist of restrictions on new oil and gas projects, restrictions on companies developing new oil and gas projects and strategies to phase out oil and gas.
Of the 369 OGPT-rated FIs covered in the update, only 136 have adopted an oil and gas policy, meaning over two-thirds do not have a policy at all. Thirteen of the institutions have a policy partially or totally tackling oil and gas expansion, meaning less than 4% of the sample have committed to aligning with climate science to stay below 1.5°C targets. A total of 27 FIs, roughly 8%, have adopted “ambitious commitments” on unconventional oil and gas through the exclusion of some developers and/or a phase-out strategy.
The OGPT analysis – covering 104 banks, 30 insurers and 235 investors – includes 158 members of the Glasgow Financial Alliance for Net Zero (GFANZ), the 450-strong coalition of financial sector firms which have committed to reaching carbon neutrality by 2050. This suggests at least a third of GFANZ signatories are not yet on track to reach net zero emissions.
Clément Faul, Reclaim Finance’s Research & Analysis manager, said: “The outcomes of the OGPT are clear: most FIs worldwide don’t get the climate emergency. It is alarming to find out less than 4% of the financial institutions rated in the tool have a robust policy tackling oil and gas expansion. All the others, even those members of the GFANZ, fail to align their business with a 1.5°C pathway.”
Don’t Bank on it
The International Energy Agency (IEA) warned last year that there can be no new oil and gas projects for the world to have a 50% chance of holding global heating to 1.5°C by 2050. Many of the 104 banks tracked by OGPT faced climate or fossil fuel finance-related resolutions at AGMs this year, including for continuing to financially support fossil fuel projects.
ShareAction, a London-based responsible investment charity, attended or submitted questions at the AGMs of 13 European banks during the 2022 AGM season. In a recent blog, ShareAction admitted responses were mixed, with some banks adopting the IEA’s 2050 net zero emissions pathway into their targets, but few willing to endorse the IEA’s findings about new fossil fuel projects.
The NGO noted some positive steps, such as UBS’ roadmap including 2030 targets to reduce absolute financed emissions by 71% in its loans to fossil fuel companies. Credit Suisse also introduced corporate finance restrictions for Arctic oil and gas and oil sands. This means the bank will immediately start restricting companies with revenues of 25% from Arctic oil and gas extraction.
Many banks’ climate plans and strategies, including the biggest financier of fossil fuels, Barclays, were passed by shareholders. Although the number of shareholders voting against these plans is increasing, including a rebellion by 19% of investors at Barclays’ AGM.
ShareAction nevertheless said it questioned “whether these banks will make meaningful updates to their strategies as a response to these votes.”
The UN’s recent updates to its Race to Zero (RtZ) criteria and rules now require members to phase down and out support for all unabated fossil fuels. As an RtZ-endorsed alliance, GFANZ and its members are subject to its updated criteria.
This change in RtZ’s criteria means in practice, corporations and investors must restrict the development, financing, and facilitation of new fossil fuel assets, including no new coal projects.