Stop financing fossil fuel projects, UN chief tells development banks
United Nations secretary-general Antonio Guterres on Thursday urged development banks to step up their efforts in tackling climate change and to stop backing fossil fuel projects.
Speaking at the inaugural Finance in Common Summit, hosted virtually by France, Guterres said he was “encouraged” by the joint declaration signed by the world’s development banks, but more action was needed “and faster”.
He appealed to finance ministers to do more in shaping the strategic direction of banks before the next major United Nations climate conference, COP26, taking place in November 2021.
“I also ask all public development banks to commit to exit from coal, domestically and abroad, and urgently phase out fossil fuel finance, and call on all governments to phase out fossil fuel subsidies, with clear time-bound targets and plans,” he said.
Environmental organisations and activists have for years been calling for banks and financial institutions to stop investing in coal and oil production. In Switzerland alone, some 80 per cent of the 179 financial institutions surveyed are still invested in coal mining companies, according to a report published last week.
Public development banks, a key source of funding for large infrastructure projects, are also facing increasing pressure to phase out fossil fuel financing and to do much more to assist poorer countries in responding to the climate emergency.
At the summit, which convened the world’s 450 development banks, the industry pledged to align its efforts in meeting the goals set out in the Paris Climate agreement and in aiding the recovery from Covid-19. Though a step in the right direction, the declaration - the first joint statement of its kind by development banks - stopped short of a firm commitment to phase out fossil fuel financing. The signatories said:
“We will consider the range of fossil fuel investments in our portfolios, avoid stranded assets, and work towards applying more stringent investment criteria, such as explicit policies to exit from coal financing in the perspective of COP26.”
G20 governments still spend heavily on fossil fuels. Guterres’ appeal to governments to end fossil fuel subsidies, comes as a new study published last week showed G20 governments are still spending half a trillion dollars on oil, gas, and coal each year.
The United States, China and other G20 governments’ support to fossil fuels dropped by only nine per cent since 2014–2016, hitting $584bn annually over the last three years, according to the report released last week by the International Institute for Sustainable Development (IISD), the Overseas Development Institute (ODI), and Oil Change International (OCI).
This marginal progress will likely be undone this year by billions of dollars committed to fossil fuels in response to Covid-19, researchers said.
“G20 governments were already not on track to meet their Paris Agreement commitments on ending public support for fossil fuels before covid-19,” says Anna Geddes of IISD, lead author of the report Doubling Back and Doubling Down: G20 Scorecard on Fossil Fuel Funding.
“Now, disappointingly, they are moving in the opposite direction. G20 funds for fossil fuels are likely on course to remain constant or even trend upwards again in 2020 compared to the last few years where we’ve seen a slight drop in support.”
Germany performed best overall in terms of phasing out fossil fuel funding, while Mexico, Turkey, and the United Kingdom ranked equally lowest. Out of the non-OECD G20 countries, Brazil scored highest while Saudi Arabia came in last.