# Bank finance for cleaner energy grows, but still lags fossil fuels – report
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-02-28
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Banks Financing Low Carbon Energy; To Hit Climate Goals
Meta Description: In 2021, banks provided 81 cents in financing to low carbon energy for every dollar to fossil fuels. To meet climate goals, they must increase support for
URL: https://financedigest.com/bank-finance-for-cleaner-energy-grows-but-still-lags-fossil-fuels-reporthtml

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LONDON (Reuters) -Banks gave 81 cents in financing support to low carbon energy supply for every dollar they provided to fossil fuels in 2021, a report showed on Tuesday, but they will need to ramp up their commitments much further for the world to hit its climate goals.

Several climate scenarios suggest that to limit global temperature rises to 1.5 degrees Celsius above the pre-industrial average, the world needs to be investing $4 in renewable energy for every $1 invested in fossil fuels by 2030.

Energy analysts BloombergNEF compiled data from 1,142 banks for what it calls an “Energy Supply Banking Ratio” to assess whether banks are aligning their financing to the real economy and the 1.5 degrees target.

In 2021, bank [financing for energy supply](https://www.financedigest.com/5-steps-to-successful-supply-chain-finance.html "5 Steps to successful supply chain finance") totalled $1.9 trillion, just over $1 trillion of which went to fossil fuels and $842 billion to low carbon energy projects and companies, according to the report.

The bank financing ratio, of 81 cents to $1, was below the [global energy supply investment](https://www.financedigest.com/volkswagen-to-invest-in-mines-in-bid-to-become-global-battery-supplier.html "Volkswagen to invest in mines in bid to become global battery supplier") ratio of 90 cents to $1.

The latter ratio has been climbing in recent years from around 0.45:1 between 2011 and 2015.

While a bounce in fossil-fuel investment is expected to counter the disruption caused by Russia’s invasion of Ukraine, the underlying economics of low-carbon energy [supply mean its growth will be sustained,” said BloombergNEF CEO](https://www.financedigest.com/ceraweek-europe-gas-supplies-to-stay-tight-2-more-winters-equinor-ceo-says.html "CERAWEEK-Europe gas supplies to stay tight 2 more winters, Equinor CEO says") Jon Moore, noting 2022’s 15% rise in low carbon energy supply investment.

Individual [banks’ financing](https://www.financedigest.com/why-finance-professionals-must-bank-on-a-journey-to-the-cloud.html "Why finance professionals must bank on a journey to the cloud") ratios varied. The Royal [Bank of Canada](https://www.financedigest.com/bank-of-canada-seen-on-hold-even-as-economy-accelerates.html "Bank of Canada seen on hold even as economy accelerates") had a 0.4 ratio and JP Morgan 0.7, against BNP Paribas’ 1.7 and Deutsche Bank’s 2.2, according to BloombergNEF, which said differences reflect geographic focus, client bases and strategies.

A spokesperson for JP Morgan said the bank provides [financing across](https://www.financedigest.com/700000-employees-across-the-uk-have-access-to-fair-finance-will-reach-one-million-employees-in-2017.html "700,000 Employees Across The UK Have Access to Fair Finance, Will Reach One Million Employees in 2017") the energy sector and has a target to extend $1 trillion for green initiatives by 2030. RBC did not respond to requests for comment.

The [report’s findings differ from another study published by environmental groups last month which said the share of bank](https://www.financedigest.com/how-banks-can-avoid-regulatory-reporting-mistakes-with-a-good-dose-of-automation.html "HOW BANKS CAN AVOID REGULATORY REPORTING MISTAKES WITH A GOOD DOSE OF AUTOMATION") financing going to renewables had stagnated.

BloombergNEF said its research covered [financing from far more banks](https://www.financedigest.com/tomorrows-finance-the-latest-innovations-in-open-banking.html "Tomorrow’s Finance: The Latest Innovations in Open Banking") than other studies.

(Reporting by Tommy Reggiori WilkesEditing by Mark Potter)


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