Mitigation Finance Update: Which Banks Take Climate Action Seriously?
story highlights

Brazil’s cement industry aims at reducing 35% of its emissions.

Bank of America will mobilize USD 300 billion in sustainable finance by 2030.

World Bank approved USD 200 million for a Off-Grid Energy Project in the West Africa and the Sahel Region.

EIB supports renewable energy and energy efficiency improving projects in France and Spain.

EBRD provides loans renewable energy in Poland and Kazakhstan.

May 2019: In the context of an international community committed to making finance flows consistent with a pathway towards low greenhouse gas (GHG) emissions and climate-resilient development, banks play a crucial role in facilitating a prudent use of global investment capacity. This Mitigation Finance Update reviews what different banks are doing to help in this effort, ranging from supporting investments in renewable energy and energy efficiency projects to innovative strategies that guide low-carbon and sustainable consumer and business behavior.

Bank of America Commits USD 300 billion to Sustainable Finance by 2030

In 2013, Bank of America committed to provide USD 125 billion in financing for low-carbon business activities by 2025 under its Environmental Business Initiative. In April 2019, the bank announced that it will achieve this commitment six years ahead of schedule, by the end of 2019. The bank also announced its next and third commitment to sustainable finance: to mobilize an additional USD 300 billion in capital by 2030 through its lending, investing, capital raising, and advisory services. In a press release, the bank emphasized among its activities so far: issuance of corporate green bonds (USD 4.35 billion since 2013); green bond underwriting by Bank of America Merrill Lynch (USD 38 billion since 2007); renewable energy tax equity financing that supported wind and solar facilities (approximately USD 10.5 billion since 2007); and funding support of sustainable projects, including USD 30 billion deployed in the U.S. in clean energy business (between 2013 and 2017) and USD 50 billion deployed in 2018 in projects with impact on the UN Sustainable Development Goals.

The announcement by Bank of America followed shortly after the release of the tenth annual fossil fuel report, titled “Banking on Climate Change – fossil fuel finance report card 2019” endorsed by over 160 organizations around the world, which revealed that 33 global banks have provided USD 1.9 trillion to fossil fuel companies between 2016-2018. In the “Fossil Fuel Finance Report Card 2019,” banks’ performances were rated based on their policies and financing practices by Rainforest Action Network (RAN), BankTrack, Indigenous Environmental Network, Oil Change International, Sierra Club and Honor the Earth among others. The authors noted Bank of America’s policies among other banks, which:

  • prohibit some financing for coal and for coal power projects;
  • have a general enhanced due diligence process that covers tar sands and Arctic oil and gas-related transactions;
  • have a general environmental and social due diligence process for corporate financing transactions applicable to the fracked and ultra-deepwater oil and gas sector as well as the Liquefied Natural Gas (LNG) sector; and
  • commit to reduce financing for and/or exclude some coal mining companies.

However, the report also shows Bank of America’s financing activities between 2016-2018 included:

  • USD 106 billion for companies active across the fossil fuel life cycle;
  • USD 39 billion for oil, gas, and coal companies expanding fossil fuels;
  • USD 20 billion for fracking – and fracked oil and gas pipeline companies;
  • USD 3.6 billion for ultra-deepwater oil and gas companies;
  • USD 2.7 billion for coal power companies;
  • USD 2.2 billion for LNG import and export companies;
  • USD 2 billion for tar sands production companies and four key tar sands pipeline companies;
  • USD 323 million for arctic oil and gas companies; and
  • USD 194 million for coal mining companies.

In other countries, the report identified as top bankers of fossil fuels: Royal Bank of Canada, Barclays in Europe, MUFG in Japan, and Bank of China. The report stresses that banks must align their overall fossil fuel policies and practices with the most prudent emissions pathway detailed in the IPCC special report, which calls for emissions to be almost halved by 2030 and effectively reduced to zero by 2050. The authors call on banks to commit, among other actions, to phase out all financing for fossil fuel extraction and infrastructure, on an explicit timeline that is aligned with limiting global warming to 1.5°C. [Bank of America Press Release] [RAN Press Release]

Bank of Canada Joins Network to Greening the Financial System

In related news, Canada’s central bank announced that it is joining the Central Banks’ and Supervisors Network for Greening the Financial System (NGFS), a group of more than 30 central banks aiming to define and promote best practices in climate risk management for the financial sector and conducting analytical work on green finance. According to a Bank of Canada Press release, joining NGFS is part of the Bank’s broader efforts to understand climate-related risks for the Canadian economy and financial system, which also include: building climate-related risks into Canada’s financial system review process;greening the Bank’s operations by pursuing Leadership in Energy and Environmental Design (LEED) certification, energy and waste reduction, and carbon disclosure; and developing a multi-year research plan focused on climate-related risks to the macro economy and financial system. The announcement was made as part of the Bank of Canada’s annual Financial Systems Review, which, for the first time includes plans to explore climate-related risks for Canada’s financial system. [Bank of Canada Press Release: NGFS] [Bank of Canada Press Release: Financial System Review]

New Credit Card Empowers Consumers to Limit Their Climate Impact

Swedish financial company Doconomy launched “Do card,” which is a credit card allowing consumers to track and reduce their carbon footprint associated with their purchases. Users can also directly compensate for their GHG emissions through projects meeting the criteria of United Nations certified green projects. To identify the Carbon dioxide (CO2) impact of each transaction, the Do card uses the Åland Index, developed in 2017 by Bank of Aland in Finland. Partnering with the UNFCCC, the initiative encourages users to compensate their carbon footprints in UN-certified projects that reduce, avoid or remove GHG emissions. A savings product by the company offers an interest rate that includes investment in climate-friendly projects. [UNFCCC Press Release] [World Economic Forum Press Release]

Multilateral Banks Continue Support for Renewable Energy and Energy Efficiency Projects

In other mitigation finance news, the World Bank, the European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD) approved financing support for several renewable energy and energy efficiency improving projects in the West Africa and the Sahel Region, Europe and Central Asia.

The World Bank approved over USD 200 million for a Regional Off-Grid Electrification Project to expand electricity access in 19 countries of the West Africa and the Sahel Region. The funding includes a USD 150 million in credit and grant from the International Development Association (IDA) and a USD 74.7 million contingent recovery grant from the Clean Technology Fund. Beneficiaries include populations in Benin, Burkina Faso, Cabo Verde, Cameroon, Central African Republic, Chad, Cote d’Ivoire, The Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Mauritania, Niger, Nigeria, Senegal, Sierra Leone and Togo. [World Bank Press Release]

The EIB, through the European Fund for Strategic Investments, approved an EUR 86 million loan for Spanish company Aena to improve energy efficiency and use of renewable energy of Spanish airports. The 2-year credit line will finance 75% of the project which is expected to cut CO2 emissions by 30% in Aena’s network of 46 airports and two heliports across Spain. In France, the EIB signed an agreement with La Banque Postale, to finance projects for the development of renewable energies (photovoltaic power plants and wind farms) in the country. EIB also confirmed agreement to a EUR 100 million loan to support the implementation of Grenoble-Alpes Metropolitan Area’s Air, Energy, Climate plan. This EUR 237 million Metropolitan project focuses on public water, energy, and waste collection, treatment and repurposing services.

The EBRD agreed to provide a local currency loan up to EUR 48 million for a 220 MW Potegowo wind farm project in Poland. The wind farm, estimated at Euro 290 million in total costs, is expected to reduce air pollution and 480,000 tons of CO2 emissions annually. In partnership with Green Climate Fund (GCF), the EBRD also agreed to support a USD 16.7 million construction project of a new 30MWp solar power plant in Kazakhstan, with a local currency loan of up to USD 11.7 million from EBRD, and a loan of USD 5 million from the GCF. The plant will generate over 38,900 MWh of electricity per year and will help to reduce 31,650 tons of CO2 emissions annually.

Capturing Carbon Emissions from Biomass Power Station

Earlier this year, the Energy firm Drax started to capture CO2 from the combustion of 100% biomass feedstock at its power station in the UK, using technology developed by Leeds-based C-Capture. As part of Europe’s bioenergy carbon capture storage (BECCS) project, the company’s pilot captures a ton of CO2 a day while producing electricity. An initial assessment of barriers and opportunities for BECCS deployment at scale in the UK was published in April by the UK Energy Research Centre.

The company is working with the government and other businesses to identify ways in which the captured CO2 can be stored or used in other processes. Ideas range from using captured CO2 to: produce sneakers from materials that turned captured emissions into polymers, a molecular structure similar to plastics; create bioplastic or thermopolymer; create construction materials including ‘cleaner cement’; develop metal alternatives or future fuels; or to “keep the fizz” in soda drinks and beer. [Climate Action News]

Mitigating Cement Emissions

According to the Intergovernmental Panel on Climate Change (IPCC), CO2 emitted during the cement production process represents the most important source of non-energy industrial process of global carbon dioxide emissions. The Cement Industry is aware that its production accounts for around 5% of total global industrial and energy CO2 emissions.

The World Bank’s International Finance Corporation (IFC) is supporting Brazil’s National Cement Industry Union and the country’s Portland Cement Association in advancing a Cement Technology Roadmap aiming at the reduction of CO2 emissions.

Cement production in Brazil increased by 273% between 1990 and 2014 (from 26 to 71 million tons). The carbon emission curve grew 223 % in this period, a reduction of 18% in emissions (from 700 to 564 kg CO2/t cement). The Roadmap envisions reaching levels of around 375 kg CO2/t cement by 2050, a reduction of 33 % compared to current values. The Roadmap was developed in partnership with the International Energy Agency (IEA) and the Cement Sustainability Initiative of the World Business Council for Sustainable Development, among others. [IFC Press Release]

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The SDG Knowledge Hub publishes monthly climate finance updates, which largely focus on multilateral financing and cover, inter alia, mitigation and adaptation project financing news and lessons, institutional events and news, and latest developments in carbon markets and pricing. Past climate finance updates can be found under the tags: Finance Update: Climate Change and Finance Update: Sustainable Energy.

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