Europe is the most virtuous region with a funding low-carbon/fossil ratio of 2.6:1
() – For every dollar of fossil funding, in 2021, the world’s banking sector put just 80 cents into low-carbon funding. The situation changes little if you look at investments in the real economy. In this case, the ratio rises to just 0.9:1. The pace is slow, too slow to complete the transition to meeting the global warming thresholds, as the pace of increasing the supply of low-carbon energy will determine the rate of reduction of fossil fuels.
Quadrupling low-carbon funding in 7 years
What is the speed at which we should move in order to stay on the path of the 2030 targets? According to the BloombergNEF report, taking as a reference the most accredited climate scenarios to stay below 1.5°C, we have to run at least 4 times faster.
“We need to increase the ratio of investment in energy supply (new investments in the supply of fossil and low-carbon fuels) from the current approximately 1:1 to a minimum of 4:1 by 2030,” write the authors of the report. This is the minimum level of low-carbon funding compared to fossil funding. The range of the various climate scenarios in fact reaches a ratio of 11:1 in the best case, while the median scenario travels on 7:1.
Europe virtuous, but not enough
Two years ago, the total amount of funding low-carbon and fossil guaranteed by the global banking sector reached 1,900 billion dollars. Of these, 842 billion dollars went into low-carbon projects and companies. But the picture has huge geographical differences. Most of the funding goes to North America, China and Europe. But while the first two regions are paired with a ratio of about 0.6:1, Europe surpasses them by more than four times with a ratio of 2.6:1.
Revealing the difference between shares and promises is the figure for the more than 120 banks analyzed that join the Net-Zero Banking Alliance (NZBA), and that have therefore committed to adopting policies in line with the achievement of carbon neutrality by 2050. The ratio of low-carbon funding to fossil funding, in this case, is only 0.92:1.