UN Secretary General calls for end to fossil fuel financing

May 11, 2021|Written by GCB News

The Secretary General of the United Nations, Antonio Guterres, has called on international lending agencies to stop financing fossil fuel projects. “We can no longer afford big fossil fuel infrastructure anywhere,” Guterres told a high level political gathering last week. “Such investments simply deepen our predicament. They are not even cost-effective.”

Pointing to unprecedented extreme weather and climate disasters over the past year, Guterres warned that atmospheric concentrations of CO2 were now at 148% of pre-industrial levels – the highest level in 3 million years. “We stand indeed at the edge of the abyss,” he said, calling for the shareholders of multilateral development banks and financial institutions to work with bank managers to fund “a low-carbon, climate-resilient development that is aligned with the 1.5-degree goal.”

Guterres delivered his remarks at the Petersberg Climate Dialogue, an informal meeting of ministers, senior government officials and central bankers from over 30 countries focusing on the UN international climate negotiations. Featuring keynote speeches by UK Prime Minister Boris Johnson and German Chancellor Angela Merkel, the virtual conference included a session focusing specifically on climate finance and was attended by European Central Bank (ECB) Executive Vice-President Frans Timmermans.

Most of the world’s major banks are substantial contributors to fossil fuel financing. Recent research has found that the world’s 60 largest and most systemically important banks provided US$3.8 trillion in finance to companies involved in fossil fuel extraction and other high carbon activities over the past five years, with JP Morgan Chase alone contributing US $317 billion to projects and activities that cause climate change. Warning that “finance is not neutral in this planetary crisis,” climate campaigners have called for a series of changes to banking regulation to reduce this support for continuing emissions.

Central banks are also highly involved in fossil fuel financing. For example, carbon-intensive companies issue 59% of the corporate bonds that the ECB accepts as collateral – far beyond the contribution of those companies to the economy. The ECB’s corporate bond purchasing programme is also highly carbon-intensive, with high-emission sectors accounting for approximately 62.7% of the value of bonds held, despite contributing to only 17.8% of euro area employment and just 29.1% of Gross Value Added. ECB refinancing operations also contribute significantly to the financing of carbon-intensive activities.

Other central banks are also heavily invested in fossil fuels. The Bank of England Corporate Bond Purchase Scheme (CBPS) is aligned with a dangerous 3.5°C of global heating, for example, while the Swiss National Bank’s portfolio is estimated to support warming of 4-6°C by the year 2100.

The UN Secretary General’s call for an end to fossil fuel financing comes as the global body prepares for the release of a major assessment of the impacts of climate change in the run up to COP26 in November.

This page was last updated May 11, 2021

Share this article