Banks in the Nordic region under scrutiny for lending to fossil fuel industries
In the global push towards a sustainable future, the banking sector plays a crucial role. However, recent reports have raised concerns about the commitment of some banks to their climate pledges.
Two of the nine largest Nordic banks, DNB and Nordea, have been under scrutiny for continuing to finance oil, gas, and coal operations, despite their declared commitments to the Paris Agreement. These banks, along with others, have provided approximately $4.9 billion in financing for the expansion of fossil fuel operations, a practice that contradicts their public climate commitments.
The controversial East African Crude Oil Pipeline (EACOP) is one such project. If completed, it could force 100,000 people to leave their homes or farmland and destroy habitats for endangered species. Nordea alone has lent more than $400m to the coal industry, and together, DNB and Nordea hold 60% of the fossil fuel investments among the nine banks.
This ongoing financing is a concern for the banks' membership in the Net-Zero Banking Alliance (NZBA), an alliance aimed at aligning the financial sector with the goals of the Paris Agreement. The revised membership criteria for the NZBA could potentially weaken accountability for banks' fossil fuel financing, making it harder for investors to hold banks accountable.
The issue highlights ongoing challenges in aligning the banking sector’s financing activities with global climate goals. The NZBA's membership criteria include being accredited by the UN's Race to Zero campaign, using science-based guidelines to achieve net-zero emissions, covering all emission scopes, setting interim 2030 targets, and committing to transparent reporting and accounting standards.
The Glasgow Financial Alliance for Net Zero (GFANZ), the umbrella body for UN-convened climate alliances that includes the NZBA, has significantly revised its membership criteria, lowering the threshold for participation. This move has been met with criticism, as it could dilute the alliance's impact and make it harder for investors to discern which banks are truly committed to the net-zero goal.
The departures from the NZBA are primarily driven by US regulatory pressures and heightened reporting expectations. Japan's second-largest bank, Sumitomo Mitsui Financial Group, has recently announced its exit from the NZBA, joining six major US banks and some Canadian banks who have previously left the alliance.
The report's authors state that there is no room for new coal, oil, and gas in a 1.5°C world, and banks should require their clients in the fossil fuel sectors to immediately publish Paris-aligned fossil fuel phase-out plans. The issue underscores the need for increased scrutiny and stricter policies to stop financing coal, oil, and gas projects while accelerating funding for a just energy transition.
Nordea, a member of the NZBA Steering Group, has been vocal about its commitment to sustainability. However, its continued financing of fossil fuel operations raises questions about the depth of its climate commitments and puts pressure on the credibility of its NZBA membership, especially as some peers have left the alliance due to similar contradictions between commitments and actions.
In conclusion, the financing of fossil fuel operations by banks like DNB and Nordea undermines their public climate commitments and casts doubt on the depth of their climate pledges. The ongoing challenges in aligning the banking sector's financing activities with global climate goals call for increased scrutiny and stricter policies to ensure a just energy transition.
- Despite Nordea's membership in the Net-Zero Banking Alliance (NZBA) and its vocal commitment to sustainability, its continued financing of fossil fuel operations raises concerns about the sincerity of its climate pledges.
- The Glasgow Financial Alliance for Net Zero (GFANZ) has faced criticism for its revised membership criteria, as it could weaken accountability for banks' fossil fuel financing, making it more difficult for investors to distinguish between banks truly committed to the net-zero goal and those that are not.
- As the banking sector continues to finance fossil fuel operations, there is a pressing need for increased scrutiny, stricter policies, and transparent reporting to support a just energy transition and align with global climate goals.
