Banks’ climate commitments have not put an end to their financing of fossil fuels. In 2024, this even increased within the scope covered by the ‘Banking on Climate Chaos’ report. To understand this discrepancy, we need to look at what financing covers, which projects it supports and the possibility of shifting credit from one market to another.
A climate pledge does not turn off the credit tap
In 2021, many banks announced their support for the goal of carbon neutrality, RFI recalls. But a declaration of intent does not, by itself, amount to a ban on financing oil, gas or coal. It does not necessarily specify which clients, activities or timeframes are concerned. To assess what is changing, we therefore need to compare commitments with financing decisions and their scope.
The ‘Banking on Climate Chaos’ report, cited by RFI, estimates that the 65 banks it studies provided $869 billion in fossil fuel financing in 2024, 25% more than in 2023. Nearly half of this sum is said to have gone to companies with expansion projects. These figures reflect the scope and methodology of this report, not all global financial flows.
The term ‘financing’ can cover different needs: a company may borrow for its operations, finance a project or raise money on the markets. A bank can also help arrange the latter transaction. The aggregate figure therefore does not, by itself, show what proportion went towards building new infrastructure, maintaining existing facilities or supporting a company’s other activities. The distinction matters: financing expansion increases future production capacity, whereas supporting a company that is already active does not automatically describe the ultimate use of every dollar.
Credit can switch channels
A bank is not the only place where a company can seek funds. If bank credit becomes more expensive, it can try to issue bonds—that is, debt securities bought by investors. The company then receives capital and undertakes to repay it under the terms of the bond. The funder and the channel change; the project does not necessarily disappear.
In an interview published by France Culture, economist Pauline Cizmic describes this mechanism in relation to oil and gas companies. Greater uncertainty over climate policy can make their bank loans more expensive. If access to the bond markets costs them less, they may turn to those markets instead. This is an analysis of how financing may work, not proof that every tightening of bank lending mechanically triggers an equivalent shift to the markets.
This possibility illustrates a practical limitation of policies focused solely on banks. Reducing loans can affect the cost of capital, but it does not guarantee that a project will lose every source of financing. The rules applying to markets, the terms on which securities are issued and investors’ decisions must also be examined. Without this overview, a decline in one channel can mistakenly be taken for a general reduction in financial support.
Interest rates and public policy alter incentives
The cost of credit also influences the choice between banks and the markets. RFI reports that interest rates and the economic context may have contributed to the change seen in 2024: companies in the sector may have found borrowing conditions more favourable than in previous years. This helps explain an annual movement, but is not enough to establish a single cause. The amounts also depend on companies’ needs, the projects concerned and the financing terms available.
Public policy affects several of these factors. Carbon pricing brings the cost of emissions into economic decisions; subsidies, by contrast, can support certain activities. In the France Culture interview, Pauline Cizmic argues for consistency between these levers. If climate rules remain uncertain or contradictory, financial players may adjust their prices without fossil fuel investment actually being halted.
For banks, financing renewable projects as well does not, on its own, answer the question of fossil fuel financing. The two flows can coexist. The amount allocated to green energy therefore does not, in isolation, show whether a portfolio is aligned with a pathway to reduce emissions. We need to know which activities are being supported, whether new fossil fuel projects are involved and how financing changes over time.
What indicators help make sense of the figures?
Three distinctions help avoid misleading comparisons. First, a climate announcement is not a measure of financing: we need to know the specific rules that put it into practice. Second, an annual figure is not a long-term trend: RFI’s data describe 2024 in comparison with 2023. Finally, financing a company is not always the same as directly financing a specific project.
To assess a banking policy, the relevant questions therefore concern the sectors and companies targeted, the place given to expansion projects, the timeframes for commitments and the financing available outside banks. A total figure can indicate the scale of a phenomenon within a given scope; on its own, it does not reveal the mechanism behind each transaction.
Fossil fuel finance thus persists less because there are no pledges at all than because of the gap between a general pledge and rules capable of acting across several financing channels. Closing this gap means tracking not only what banks say, but also where capital goes, on what terms and for which activities.
References
- France Culture, ‘Why do banks continue to finance fossil fuels?’
- RFI, ‘Why did banks finance fossil fuels more in 2024?’
Oil pumps at Lost Hills, California. Illustrative photo of the oil industry.
