Holding global financial businesses to account

As Ethical Consumer readers are no doubt acutely aware, we are in a time of multiple, urgent and overlapping global crises. Accelerating climate chaos and the breakdown of nature impact ever more communities all around the world, threatening their human rights. Meanwhile, the emergence of the Coronavirus wreaked further havoc, with habitat destruction making the rise of new pandemics more likely.

With the urgency of our current situation in mind, BankTrack reformulated its mission at the start of 2022 to challenge banks globally to act urgently and decisively to address four interrelated crises: climate, nature, pandemics, and human rights violations.

Climate: stop financing the fossil fuel industry

The movement to stop bank finance for fossil fuel expansion is growing, and although there’s still a long way to go, the pressure is starting to pay off.

France’s La Banque Postale set an international precedent among the larger ‘mainstream’ banks in October 2021 by committing to a complete exit from oil and gas by 2030 and immediately stopping loans to companies developing new projects in these sectors. (It’s important to remember though that banks like the Co-op and Triodos stopped financing these sectors years ago, or never started.)

Others have since followed suit, including in the UK where Lloyds Banking Group recently committed not to directly fund any new oil and gas projects. The word ‘directly’ represents a massive loophole of course, but the move – made in the last days of Liz Truss’s brief tenure as PM – can be applauded for bravely flying in the face of government policy to expand North Sea oil and gas.

Meanwhile commercial banks, which globally have put $4.6 trillion into the fossil fuel industry since the Paris Agreement, have responded to the climate emergency by launching the Net Zero Banking Alliance. However, barely a year into existence it is currently at risk of falling apart, as big US and Canadian banks in particular threaten to walk out as it becomes apparent they may actually be held to their stated commitment to bring down their financed emissions to net zero. As flawed as the Net Zero approach is, there’s a lot at stake here if banks abandon even the current low level of ambition.

Human rights: policies not matched by performance

In November, BankTrack launched its latest Human Rights Benchmark, an assessment of 50 large banks globally on whether they are meeting their international obligations to respect human rights.

We found that although most banks have policies in place and increasingly well-described processes, even the better-performing banks are failing to show that they take steps to resolve the human rights abuses they are financing.

For this year’s benchmark we also analysed over 150 letters from campaigners to banks about finance for companies linked to alleged human rights abuses, including companies supporting the military junta in Myanmar and the illegal settlements in the Occupied Palestinian Territories, as well as companies developing damaging projects like the East African Crude Oil Pipeline in Uganda and Tanzania, or the Jadar lithium mine in Serbia.

We found that, while banks responded more often than not, most responses were of the bland “no comment” kind, referring to the bank’s policies without dealing with the specific accusations. This underlines the challenges of seeking to hold banks accountable for damages they cause, and the importance of developing better laws to ensure banks can be held accountable.

Nature and pandemics: risks the banks don’t yet recognise

While banks have, over the last 20 years, developed policy approaches to start addressing their impacts on the climate and human rights, some areas are still total blind spots for most. These include industries that drive deforestation and, in the process, increase the risk of a deadly disease carried by wild animals jumping over to humans – for example, the expansion of the beef industry in the Amazon basin, or the wholesale destruction of forests in the US and Eastern Europe for wood pellets to fire biomass power stations like Drax in North Yorkshire.

The way the biomass industry impacts not just forests, but also climate change, pandemic risks and even the rights of forest-dwelling communities, provides a clear example of the need for banks and regulators alike to realise that our global crises are closely interconnected.

Our banks need to urgently stop fuelling these crises with their finance, and instead fund solutions that are equally joined-up.

Which banks are involved with which ethical issues?

Many of the banks in our banking guides are involved with industries and practices you may prefer to avoid. The table below is collated from various reports looking at banks and arms companies, fossil fuels, deforestation, and animal cruelty.

Table compilation by Ethical Consumer.