Big Banks Are Funding Climate Disaster. Business Needs to Push Back.

By Paul Polman

         Illustration by Maria Corte


We now have confirmation that humankind is causing runaway climate change. 

The world’s most authoritative climate science body, the United Nations’ Intergovernmental Panel on Climate Change, or IPCC, says unequivocally that we are headed toward catastrophe within two decades, and that extreme weather and ensuing chaos are already with us.

In light of this knowledge, it is staggering the degree to which the global banking sector continues to fund the crisis.

In the five years since the Paris Agreement, our 60 biggest banks have increased their investment in coal, oil, and gas to nearly $4 trillion. 

This is compared with the $203 billion in bonds and loans that has gone toward renewable projects—just 5% of what has gone into fossil-fuel financing.

True, there are sincere and impressive efforts, including from some major banks and insurers, to decarbonize. 

A growing number of investors are demanding greater transparency over their exposure to climate risk.

But across the sector, progress is narrow and slow. 

On average each day, Wall Street’s banks funnel $1 of every $10 they hold into fossil fuels. 

Undoubtedly, they are motivated more by the interests of a few shareholders than the future of humanity.

The IPCC’s report isn’t without hope. 

The one upside of knowing for certain that climate change is man-made is knowing that the future is in our hands. 

Deep cuts in greenhouse-gas emissions could still stabilize rising temperatures. 

But it cannot happen, irrespective of the actions of governments, industry, and society, if the so-called masters of the universe continue to fund planetary suicide.

Shifting finance won’t be easy. 

Big banks don’t need fossil fuels. 

These investments carry numerous risks, from reputational damage to legal exposure and the imposition of new regulations that will leave assets stranded. 

Indeed, renewables now offer a considerably more attractive return. 

But a toxic combination of vested interest, greed, laziness, and frankly a lack of moral leadership is conspiring against change.

An important and underused tactic can help: CEO activism. 

Responsible business leaders can and must start making greater demands of irresponsible banks.

Anything else is an abdication of corporate duty. 

It is good news that so many companies have introduced targets to reduce their direct emissions (known as “scope 1 and 2” emissions), and some, their indirect emissions (scope 3). 

But responsibility goes further, extending to all partners in a company’s value chain, including the banks it deals with. 

If your business banks with an institution that finances global warming, it rightly reflects badly on you.

Most big firms apply some sort of standard to the partners they hire for other services. 

Too few have used this power to raise standards in finance. 

If you wouldn’t bring on a public-relations firm that helps sell tobacco, why prop up a bank whose investments are propelling us toward climate disaster? 

Why indirectly support lending to a fossil-fuel industry that will render your own climate commitments impossible to achieve?

When I was CEO of Unilever, we were the first in the consumer-goods sector to issue green bonds, given to projects that cut carbon, water usage, and waste. 

We were already recognized as a leader in sustainable business, and we wanted to spur better behavior in banks, encouraging lending on the basis of environmental impact. 

We set equivalent conditions with partners across our value chain, not just as sticks but also as carrots to support those we worked with to realize their values.

It is a different way to conceive of corporate responsibility: taking ownership of all your social and environmental impacts, not just the most obvious consequences of your actions. 

The climate crisis demands this wider frame.

Taking full ownership of your actions is a core characteristic of what sustainability guru Andrew Winston and I call a “net positive” company in our new book. 

These courageous businesses thrive by giving more than they take, ultimately profiting by fixing problems rather than creating them.

Imagine a set of six concentric circles. 

Each is a sphere of influence, or Impact Level, starting with a core of direct operations and moving out to include a company’s indirect operations—its choice of value-chain partners; its relationships with the rest of the sector; its role in bigger systems, including policy-making; and its imprint on the wider world.

The stakeholders that businesses rely on increasingly expect leadership at each level even if they recognize that a company’s power diminishes as it moves outward. 

This is true for employees, customers, suppliers, and governments,and it’s especially true for the next generation, which frankly won’t care what your purpose statement says about protecting the environment if you’re teaming up with the financial institutions helping to wreck their future.

The latest climate science, not matter how sobering, doesn’t automatically lead us to despair. 

But it does require every big player to quit carbon and become a force for a healthy, regenerative economy and a safer world. 

The big banks come top of this list. 

Big business needs to give them a push. 


About the author: Paul Polman is the former CEO of Unilever and a U.N.-appointed sustainable-development goals advocate. He is the author of the forthcoming book, Net Positive: How Courageous Companies Thrive by Giving More Than They Take.

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