Banks fossil fuel financing hits $3.2tn in 7 years - ActionAid raises climate change concerns
ActionAid Ghana has called on the government and other African leaders to put in place stringent regulatory regimes in the banking and financing sector to stop the financing of fossil fuel and large-scale industrial agriculture projects.
The call follows the discovery that major banks have invested an estimated $3.2 trillion in fossil fuel projects and $370 billion in industrial agriculture in developing countries over the past seven years since the Paris Agreement was adopted.
The findings were made in a research conducted by ActionAid on how investments in fossil fuel was having negative impact on the global climate crisis.
The Country Director of ActionAid, John Nkaw, presented the findings of the research at this year’s climate change conference organised by ActionAid in Accra yesterday.
The conference was on the theme, “Fund our future: promoting investment in climate change adaptation for resilient communities.”
It brought together smallholder farmers, the Peasant Farmers Association of Ghana (PFAG), researchers, the academia and civil society organisations (CSOs) in the climate change space.
The report tracked financial flows from banks to fossil fuels and industrial agriculture in 134 countries in the developing world.
The research established that despite global banks public declaration that they were addressing climate change, the scale of their continued financing of fossil fuel and industrial agriculture was staggering.
It added that although most of the banks had committed to reach net zero emissions in their financing portfolios by 2050, none of them had adequate policies to genuinely decarbonise their portfolios.
The research also found that none of the major banks had a policy to fully phase out oil and gas financing even though that was a requirement for their financing to be consistent with 1.5 degrees climate goal.
Threats to climate change
Mr Nkaw explained that the report dubbed, "Where the finance flows: banks fuelling the climate crisis", was focused on the core activities of the banks providing credit to companies through loans and underwriting shares and bond issuances.
He described the huge investment in fossil fuel and industrial agriculture as one of the greatest threats to the fight against climate change.
"The investment of over $3.2 trillion in fossil fuel over the last seven years raises some concerns.
It points to the fact that a considerable proportion of the funding is going to contribute towards greenhouse effects because statistics show that, petroleum exploration contributes significantly towards the pollution of the environment and depletion of the ozone layer," he said.
Mr Nkaw said the investment in fossil fuel ran contrary to the Paris Agreement which set clear targets for countries to work systematically to de-invest in that sector as a measure to reduce greenhouse emissions.
Again, he said, the development was problematic because most of the resources invested in fossil fuel could have been channelled into renewable energy transition in a way that could balance the level of pollution of the earth.
"So, we are saying that the banks must immediately end the lending and underwriting for corporations involved in fuel expansion.
This must include project financing and general corporate financing and be broadly applicable across whole corporate groups," he stressed.
He observed that the huge investments in fossil fuel that had proven to be counterproductive could have been channelled into renewable energy transition to create more employment opportunities.
He said the way forward for Ghana and other developing countries was to prioritise investment in organic agriculture that would help to build climate resilience and ensure food security.
“We are calling on government to reduce investment into industrial agriculture which fuels fertilizer utilisation, huge chemical use and a lot of soil compaction.
We are also encouraging agro-ecology which is organic agriculture as a panacea to supporting government to reduce climate effects and create employment opportunities as well as food security,” he said.
The Vice-Chancellor of the University of Environment and Sustainable Development (UNESD), Prof. Eric Nyarko-Sampson stressed that the skewed investment of banks towards fossil fuel and industrial agriculture was a trigger for industrial activities that destroyed the environment and escalated the climate crisis.
He said governments in developing countries needed to be more responsive to the environment by taking steps to stop fossil fuel expansion.
Prof. Nyarko-Sampson underscored the need for CSOs and other stakeholders to work closely with local communities to build resilience against climate change.