Modeling the Carbon Emissions of Financing Policies of Major Financial Institutions

Abstract

The majority of the world's nations have reached a consensus that global carbon emissions must reach around net-zero by 2050 to mitigate the most significant repercussions of global climate change. This will require a coordinated effort between governments, individuals, and private institutions. This includes financial institutions, whose financing in the coming years will directly influence the future energy mix. Many financial institutions have touted goals to become net-zero and have made policies to that end. These policies include divesting from certain kinds of fossil fuels, committing to invest in renewable energy products, and developing “sustainable" financial products so that consumers can invest in more sustainable or renewable ventures. This research seeks to evaluate the financing policies that financial institutions have announced toward fossil fuel industries and sustainability ventures and to gain a preliminary understanding of how these policies may influence these financial institutions' carbon emissions in the future. To conduct this research, data on bank policies were compiled, evaluated, and used to model future financing for fossil fuel industries with financing data available from the Rainforest Action Networks' \textit{Banking on Climate Chaos} report. The cumulative sustainability commitments were also collected and visualized. It was projected that fossil fuel investments would likely increase across all major banks analyzed. The greatest increases in investment were to fossil fuel companies expanding their production or utilization of fossil fuels. While all banks' fossil financing was projected to increase, there was a slight decrease seen in some banks' carbon emissions intensity, likely due to the change in the type of fossil fuel invested in overtime. This research highlights the importance of having strict guidance for banks' fossil fuel financing so that they can implement policies that will reach 2050 net-zero goals rather than policies that amount to “greenwashing" tactics.