Did you ever imagine that the bank holding your mortgage, the organisation on which you have effectively staked your future, shares your wish to see the threat of climate change lifted, or will be there for you if and when things go pear-shaped? Think again.
An annual report released a week ago by eight leading climate organisations and endorsed by ActionAid Australia reveals a sorry story of backsliding and deceit by the world’s big banks – including all four Australian banks – on their stated commitments to help phase out fossil fuels.
It’s a story that’s been playing out every year since the Paris Agreement came into force in 2016 with the promise of closing policy loopholes that allow big money to flow to gas, oil and coal projects around the world, including Australia’s large and growing offshore gas industry.
Obviously, this isn’t happening. Instead of mitigating the climate crisis, the global financial system is helping to extend and worsen it. At the centre of that system, the world’s banks are in the words of the report’s title “banking on climate chaos”.
According to the 15th BOCC report (all following figures in US dollars), ANZ Bank remained the biggest Australian fossil fuel investor in 2024 when it approved $2.1 billion in fossil fuel loans. NAB was next at $1.5 billion, Westpac approved $1.1 billion and CBA $616 million.
But that’s not the whole story. All of Australia’s Big Four banks increased lending to the fossil fuel industry last year. CBA’s investments rose by $35 million and ANZ’s by $54 million, but the real story was with the other two. In 2024, both NAB and Westpac radically increased their fossil fuel portfolio: NAB by $425 million and Westpac by $534 million.
Australian banks were doing no more and no less than following a global trend. Led by JP Morgan Chase and Citibank, the world’s 65 biggest banks committed $869 billion to fossil fuels in 2024 – up $162 billion from 2023. Nearly half that money, $429 billion, went to companies planning to expand fossil fuel projects.
That increase from 2023 to 2024 reversed a downward trend triggered by the Russian invasion of Ukraine in early 2022. The resulting spike in energy prices lifted fossil fuel profits and reduced the industry’s need for loan finance, but when central banks cut interest rates, commercial banks offered cheaper loans, and that drove the expansion of the world’s liquified natural gas (LNG) industry.
The big banks have backed away from commitments they made for the ambitious Net Zero Bank Alliance at the Glasgow climate summit in 2021. NZBA’s noble aim was to align banks’ lending and underwriting with the Paris Agreement goal to limit the global temperature rise to 1.5C above pre-industrial levels.
But as BOCC notes, earlier this year all major North American and Japanese members of the alliance pulled out – even after the alliance watered down its target from 1.5C of warming to a less-demanding 2C. Less than half the 65 banks assessed for the report are still members.
In a US Senate hearing in February, asked about the effects of climate change on the US economy, Federal Reserve chairman Jay Powell said that banks and insurance companies were already pulling out of coastal and fire-prone areas.
“If you fast-forward 10 or 15 years,” he said, “there are going to be regions of the country where you can’t get a mortgage, there won’t be ATMs, the banks won’t have branches and things like that. It’s not that the banks will stay there and keep making loans in the face of evidence of disaster.”
This was the head of the world’s most powerful central bank pronouncing that big commercial banks – essential components of an expanding fossil fuel industry and therefore major contributors to the worsening climate crisis – will over the next decade or so simply pull out of regions most vulnerable to climate impacts. Hypocrisy writ large.
With climate change now bearing down on our economies and our lives, already affecting the value of homes and other assets, banks will continue to neglect their broad customer base, you and me. Faced with growing climate impacts they will do what they’ve always done (though they try to hide it): move in the direction of profit and away from potential losses.
The only force we can count on long-term is mutual support, from family, friends, neighbours and if we’re lucky, whole communities. In a democracy like ours this should include government, which in turn should use its bargaining power to draw banks into the fold. But don’t bet the house on it.