Royal Bank of Canada has emerged as the biggest financier of the fossil fuel industry in 2022, knocking JPMorgan from the top spot, as Canadian banks increasingly take on the role as the “lenders of last resort” for controversial carbon-intensive projects.
An annual report on fossil fuel financing by a coalition of campaign groups organised by the Rainforest Action Network found that RBC extended $42.1bn in funding to fossil fuel companies and projects in 2022, including $4.8bn for tar sands. Scotiabank, another Canadian bank, also appeared in the list of the top 10 financiers.
The researchers said Canadian banks were becoming the backstop for fossil fuel financing, potentially picking up the slack for financing projects and companies shunned by lenders in Europe. Canadian banks have provided $862bn to fossil fuel companies since the signing of the Paris Agreement, the study found.
Richard Brooks, climate finance director at Stand.earth, an environmental group involved in the research, said it was “obscene that [RBC] is now the world’s dirtiest banker for fossil fuels”.
“RBC is moving in completely the wrong direction, dragging our climate ambitions backwards and positioning Canadian banks as fossil fuels’ lenders of last resort,” he added.
RBC and Scotiabank did not respond to a request for comment.
The report comes as the role banks play in driving global warming through the financing of carbon-intensive companies and projects faces intense scrutiny. It found that 43 of the banks, including RBC and JPMorgan, were part of the Net Zero Banking Alliance, whose members have committed to take action on climate, while 49 had pledged net zero emissions.
The research found that fossil fuel financing from the world’s 60 largest banks hit $673bn in 2022, down 16 per cent from the previous year. The figure was the lowest total between 2016 and 2022, but this was because of “unusual geopolitical and economic conditions, not shifts in bank policy”, said the report.
Oil and gas companies may not be investing as aggressively in new production as they were a decade ago, but in the wake of Russia’s war on Ukraine last year and the subsequent energy crisis, many oil and gas companies reported record profits, and some oil majors such as ExxonMobil and Shell asked for no financing from banks in 2022.
The research found that 30 companies looking to expand their liquefied natural gas operations sought to almost double the financing in 2022 compared with 2021, as countries such as Germany ramped up the use of LNG instead of gas from Russia.
Maaike Beenes, campaign lead for banks and climate at BankTrack, called the decision by banks to boost their financing for LNG in the past year irresponsible.
“These gas projects will not be able to address Europe’s short-term energy needs or reduce household bills — instead they will lock us into dependence on fossil fuels for decades,” she said.
US banks continued to dominate fossil fuel financing, accounting for more than a quarter of all financing between 2016 and 2022. JPMorgan was the second biggest financier of fossil fuels last year, with $39.2bn in financing, after topping the list for six years.
JPMorgan said it provided financing “across the energy sector”, which included “supporting energy security” helping clients transition to cleaner business models.
Other US banks on the list included Wells Fargo, Bank of America and Citigroup. Citi and Wells Fargo declined to comment, while BofA did not respond to a request for comment. Several Japanese banks also appeared in the top 10.
The 60 banks channelled $150bn last year into the top 100 companies expanding fossil fuels investments, the report said.
Although some banks had fossil fuel financing policies in place, these often did not cover equity and bond underwriting, and often targeted specific project finance but did not apply to general corporate financing, it found.
