The 60 largest commercial and investment banks have collectively financed $3.8 trillion in fossil fuel companies between 2016 and 2020, the five years since the Paris Agreement was signed, according to a report published in March from a collection of climate organizations titled Banking on Climate Chaos 2021.

But that number is not the full story: Some banks have been increasing their business with fossil fuel companies while others have been decreasing during that time.

What's clear is the power banks wield in affecting climate change.

"Getting lenders to choke off money to fossil fuel companies is the next needed move for the industry to address the material risks that the coal, oil and gas industry faces," says Leslie Samuelrich, president at investment advisory firm Green Century Capital Management.

According to Ben Ratner, a senior director at the Environmental Defense Fund who leads the business energy transition team, "alongside reducing overall funding to the fossil fuel industry, banks should use their most powerful tools – like loan eligibility and rates – to incentivize corporate clients to reduce polluting practices like methane emissions and gas flaring, while transitioning to sustainable business models."

The two banks that increased fossil fuel financing the most are in China

From 2016 to 2020, Postal Savings Bank of China had the largest percent change in fossil fuel financing — it increased over 1,200% from $168 million in 2016 to $2.2 billion in 2020, according to CNBC Make It's analysis using data from the Banking on Climate Chaos 2021 report.

China Minsheng Bank had the second highest percentage change in fossil fuel financing from 2016 to 2020 with a 550% increase, as its financing went from $1.7 billion to $10.8 billion, according to CNBC's analysis.

Neither Postal Savings Bank of China nor China Minsheng Bank responded to CNBC Make It's request for comment.

However, Zhang Jinliang, chairman of Postal Savings Bank of China, said in a March 29 statement on the company's corporate social responsibility that the bank "upheld the vision of a community with a shared future for mankind, aggressively pursued green development, promoted green finance and climate financing, strengthened environmental, social and governance (ESG) risk management, and promoted green operation and working in an environment-friendly way."

Postal Savings Bank of China reported that "at the end of 2020, the balance of green loans stood at RMB 280,936 million, representing an increase of 30.20% compared with the prior year." For example, the bank lent money to fund a solar power-generation project involving the Beigangchang River in Hunan Province. Also, the bank set up a credit program to support bamboo farmers in the Zhongtai Subdistrict, the company said. Within the bank, double-sided printing was encouraged to save paper and 5,307 employees of the Bank participated in afforestation activities, planting 104,012 trees.

Similarly, on March 30, China Minsheng Bank published a 50-plus-page disclosure of its "environmental, social and governance (ESG) management and performance." "At the environmental level, the Company insists on green development, actively deploy green finance, leverages its financing role to promote the development of green economy, low-carbon economy and circular economy," the bank said. The bank also said in the disclosure that it "restricts credit placement to high-polluting and high energy-consuming industries."

China Minsheng Bank reported that "at the end of December 2020, the Company's green credit balance was RMB 52.669 billion, up by RMB 20.414 billion, or 63.29%, as compared with the beginning of the year," the bank said. Internally, China Minsheng Bank says it promotes a climate consciousness, hosting "special trainings on green finance for two consecutive years to enhance the green development awareness" and encouraging employees to not waste food and conserve water.

But "dollars speak louder than words," Ratner tells CNBC Make It. "Big banks must close the gap between their climate pledges and their everyday lending practices."

"The test for a bank's climate health is not the slickness of its marketing material or even the amount spent on green energy, but whether the entirety of the bank's activities are aligned with the goals of the Paris Agreement," Ratner says.

Two banks that decreased their fossil fuel financing the most are based in Europe

At the other end of the spectrum, French cooperatively owned bank Crédit Mutuel had the largest drop in fossil fuel financing, with a 100% decline from $19 million in 2016 to zero in 2020, according to CNBC Make It's analysis using data from the Banking on Climate Chaos 2021 report.

"In 2018, we made a decision to stop all financing for coal-fired power plants and coal mining in all countries," says a spokesperson for the Crédit Mutuel, a cooperative bank that is owned by its customers.

In 2020, Crédit Mutuel decided it was willing to lose money "in the short term" for its fossil fuel goals.

"[T]oo many of the commitments made by companies will only serve to weigh on those who come after us," says the bank spokesperson. "In the course of our banking business, we develop balance sheets over 10, 20 and 30-year periods ... it is only natural therefore that we pay particular attention to global warming, which is having an increasingly strong impact on our customers (and therefore on the bank). This calls for rapid action."

Crédit Mutuel's leadership in its fossil fuel financing is consistent with its performance and publically stated goals, Rafael Quina, a director at Fitch Ratings and the head of French and Portuguese banks' ratings, tells CNBC Make It. Part of this is because the bank doesn't do as much business with large corporate customers like fossil fuel companies when "compared to larger and more diversified European banking groups," Quina says. (Quina's comments are based on financial data from Crédit Mutuel Alliance Federale, a subgroup of Crédit Mutuel which represents around 80% of group assets, because it is the most up-to-date publicly available information. "We think it is fairly representative of the trends relevant for the whole group," Quina says.)  

But it's also due to Crédit Mutuel's aggressive and long-standing efforts, Quina says. Fitch has given the bank an A+ rating for its "solid capitalization profile," with a "negative outlook" "as pressure on the bank's ratings would increase if the [economic] downturn is deeper or more prolonged than we currently expect," Quina says. France's GDP fell in 2020 but Fitch expects it to rebound in 2021.

"They aim for a zero coal exposure in financing and investment portfolios by 2030 and have announced discontinuing several financings of projects that are not in line with their environmental goals," Quina says. Also, Crédit Mutuel has "been improving the tracking of their exposure to fossil fuel clients (and in a relatively granular way) since 2018, which is better than some larger European peers which are currently implementing these tools," he says.

That's not to say there's not room for improvement, Quina says.

"Similarly to most international and large banks, there is still work to do to better align banks' credit portfolios with the Paris agreement goals," he says. "This includes refining existing tools and sector policies, continuing to disclose to the market the progress achieved in accompanying the transition of clients to a less carbon intensive economy," says Quina.

Zürich, Switzerland-headquartered investment bank UBS decreased fossil fuel financing by 73%, from $7.7 billion in 2016 to $2.1 billion in 2020, making it the bank with the second largest pullback, according to CNBC Make It's analysis.

UBS's change is "part of a multi-year process to reduce exposure to carbon-related assets and develop methodologies that enable more robust and transparent disclosure of climate metrics," says a spokesperson for UBS. "UBS's exposure to fossil financing fell so much from 2016-2020 partly because the bank further integrated climate risks into risk identification and reporting processes." At the end of 2020, 1.9% of UBS's banking balance sheet ($5.4 billion) had "exposure to carbon-related assets," down from from 2.3% at the end of 2019 and 2.8% at the end of 2018.

Also, being transparent and granular about its current financial portfolio's exposure to "carbon-related assets" and "climate-sensitive sectors" is key to its ability to make informed decisions, a spokesperson for UBS tells CNBC Make It. UBS has developed a "risk heatmap," in collaboration with the United Nations Environment Programme Finance Initiative on Climate-Related Financial Disclosures, which is embedded below.

UBS still has, as its heatmap shows, money invested in thermal coal mining, oil refining, shale gas drilling, to name a few. The "heatmap" shows that UBS has $82 million "exposure to companies that are at a high risk of disruption should the world pursue the Paris Agreement ambitiously ... whether they are disrupted by changes in policy, shifts in demand/supply, or being out-competed by lower-carbon alternatives," a UBS spokesperson says.

Even though UBS still has money that is at risk, the bank supports an ambitious pace to pursue the Paris Agreement objectives, a spokesperson says.

Money follows oil — and public perception

"In a nutshell, finance is both global and local. Where local banks see or predict fossil fuel consumption increasing in local markets, they increase lending. Where local banks envision a drop in demand, they curb lending," says Jonathan Macey, professor of corporate law, corporate finance and securities law at Yale University.

So data ranking banks' fossil fuel financing "gives us a good window into possible global patterns of fossil fuel production and possible global patterns of shifting to renewables," Macey says.

A need to make money and keep customers happy is also a motivator for banks.

"The move away from fossil fuels by asset managers has been hampered by fears of potential underperformance and concerns about alienating their clients but [it] is finally gaining traction," Samuelrich says.  

Then there's public perception: "Lenders are more reluctant to lend to fossil fuel producers where there is a lot of environmental activism. In a totalitarian controlled economy, such activism does not have much impact," he says.

But many of the large energy companies that are still active in fossil fuels are transitioning to clean energy and therefore will need funding, as such projects are "more capital intensive," says James Vaccaro, the executive director of Climate Safe Lending Network. So "sometimes this is part of a positive story" for the banks, he says.

"What is surprising and disappointing is that there appears to be increases in flows of finance to actual fossil fuel activity, predominantly in gas," Vaccaro says, pointing to a report predicting capital expenditures are expected to grow at more than 8.4% per year over the next five years. And Banking on Climate Chaos 2021 report "reveals funding increasing for fossil fuel expansion and exploration — that's deeply concerning," he says.

So "what's really needed is more granularity and transparency about what banks are lending to," Vaccaro says.

"If the increases in bank lending were into clean energy projects within companies that still have fossil fuel holdings, then why not show that? What's more likely is that you will see banks who have placed restrictions on some fossil fuels (coal, arctic exploration, tar sands) simply increase in other fossil fuels (gas, fracking etc.)," Vacarro says.

While it may not be realistic for banks to change overnight, they need to do more, collectively, than they are, Vacarro says. And indeed, a new report published April 15 from the Climate Safe Lending Network offers a ten-point policy recommendation for how to implement such regulations.

"There is clearly evidence that many banks are falling short of the decisiveness required by the transition," Vacarro says. "The fear of losing business to other banks is still more visceral than their intellectual concern over the impact on the planet. With as few as 81 months left at current rates before we lock in temperature rises [of more than 1.5 degrees Celsius] globally, they're just moving too slow. And there's no bailouts for that."

Here, Vacarro is referring to the time left — six years, eight months and nine days as of April 22 — until the carbon dioxide budget is reached and exceeded for global warming of the planet exceeds 1.5 degrees Celsius, the preferred limit of global warming compared to pre-industrial levels as agreed upon by The Paris Agreement.

Despite the urgency, there is no panacea on the horizon.

"I think regulation is years away, even under the Biden Administration," Samuelrich says. "The fossil fuel divestment movement has been driven by client and customer pressure and that's likely the quickest path to get the banks to move away from fossil fuels. I think shareholders also can serve an important role by raising the material risks to financial institutions and press them to pivot their lending to supporting a greener economy."

CNBC Make It used data from a report published in March from a collection of climate organizations and titled Banking on Climate Chaos 2021. The report was a collaboration by seven non-profits: Rainforest Action Network, Bank Track, Indigenous Environmental Network, Oil Change International, Reclaim Finance, and Sierra Club. And for it, the report authors aggregate bank lending and underwriting data using Bloomberg's league credit methodology, meaning credit is divided between banks playing a leading role in a given transaction, and uses data from Bloomberg Finance L.P. and the Global Coal Exit List. Prior to the report being published, banks were given the opportunity to weigh in on the findings.

— CNBC's Evelyn Grace Chang contributed reporting to this story. CNBC's Nate Rattner contributed data analysis and visualization to this report.

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60 largest banks in the world have invested $3.8 trillion in fossil fuels since the Paris Agreement

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