With the future of our planet at stake, banks need to be ambitious and move beyond policies that only offer mere lip service instead of solutions that meet the sheer scale of the challenge. Failure to do so would be unconscionable, Zahra Hdidou writes.
ADVERTISEMENTThis month, as banks gather for their AGMs, they face an important decision. While it’s not a surprise to see CEOs ignore the throngs of climate protesters shouting outside their offices, banks are starting to face criticism in more unlikely circles.
With investors getting increasingly twitchy as banks continue to finance climate chaos, this year it’s time for them to listen and act.
It makes no sense for banks to continue to pump billions into rapidly depreciating carbon assets as our boiling planet reaches the point of no return.
Instead, they can do what they do best — follow the money, grow the economy by investing in green alternatives, and protect their profits.
To do that — all while protecting the planet in the process — makes sound financial sense.
Pouring fuel on the fire
2023 has been packed full of disastrous warnings for the future of our planet. With stronger El Niño events causing severe food shortages across southern Africa and heavy rain and drought destroying crops across Europe, no corner of our planet has been left untouched by climate catastrophe.
For decades, as climate change wreaked havoc on communities across the Global Majority, banks have ignored the damage their investments are causing.
Two banks holding their AGMs this week are continuing to pour fuel on the fire. Since the Paris Agreement, banks, including HSBC and Barclays, have pumped $3.2 trillion (€2.96tn) into fossil fuel businesses and a further $370 billion (€343.2bn) into unsustainable agriculture and farming, according to recent research published by ActionAid.
Our report found that HSBC investments have gone to offshore oil projects in Ghana that stand accused of displacing and violating the rights of Indigenous communities.
In Brazil, $17.2bn (€15.9bn) in investments have been linked to deforestation in the Amazon and Cerrado biomes.
As for Barclays, they are the largest funder of TotalEnergies in the Global Majority, providing $2.1bn (€1.94bn) since 2016 to prop up one of the fossil-fuel supermajors.
The climate effects of projects like these are causing over $400bn (€371bn) per year in loss and damages in climate-stricken countries. Still, the cost is more than just financial, with women and girls more likely to face conflict, displacement and displacement and gender-based violence.
A sure-fire cash cow no more
And while banks headquartered right here in London continue to show apathy towards those facing climate catastrophe, investors too are growing alarmed at such reckless behaviour.
Investors have a clear interest in promoting effective risk management, meaning that banks should, therefore, view climate change as one of the biggest risks to the sustainability of the financial sector.
Just recently, investors warned that banks aren’t adequately disclosing the impacts of climate change on their financial stability and are holding too little capital to manage climate risks.
And in Australia, the oil and gas company Woodside Energy recently faced a shareholder backlash over an emissions plan that investors believed wasn’t ambitious enough on climate action as it didn’t align with the 2015 Paris Agreement.
Dissent from investors at such a scale is unprecedented and signals an irreversible sea change in opinion that banks can no longer avoid. Instead of viewing fossil fuels as a sure-fire cash cow, investors now see climate change as an existential threat to the global economy.
Instead of burying their heads in the sand and praying the tide rolls back in, banks must get on board or risk huge disruption and volatility to global markets.
ADVERTISEMENTWe can't keep lacking perspective — or conscience
Just last week, a report by the Green Finance Institute warned that environmental destruction could lead to a 12% reduction in the UK’s GDP by 2030 if we continue along this destructive path.
To put this in context, failure to act globally on climate change will cost the global economy $23tn (€21.3tn) over the next few decades, according to Swiss Re Institute, triggering a global financial crash on par with 2008 or the COVID-19 pandemic.
When millions of Britons have struggled with a never-ending cost of living crisis, it’s unconscionable to see banks like HSBC and Barclays continue to play fast and loose with the public’s money, all in pursuit of short-term profit.
With the future of our planet at stake — and the collapse of our global financial system becoming increasingly more likely as the effects of climate change worsen with each passing year — banks need to be ambitious and move beyond policies that only offer mere lip service instead of solutions that meet the sheer scale of the challenge.
Failure to do so would be unconscionable.
ADVERTISEMENTZahra Hdidou is Senior Climate and Resilience Adviser at ActionAid UK.
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