Banks’ green fees overtake fossil-fuel fees for second year

investmentnews.com:

For a second straight year, banks are making more money providing loans and underwriting bond sales for green-related projects than they’re earning from fossil fuel companies.

Together, banks have generated about $2.5 billion of revenue from climate-focused financing so far this year, compared with $2.2 billion from their work with oil, gas and coal companies, according to data compiled by Bloomberg.

It’s a big change from as recently as 2020, when lenders pocketed almost double the fees from Big Oil than they did from backing green initiatives.

Still, such a narrow green-to-fossil fuel ratio is far from where we need to be, says Trina White, an analyst at BloombergNEF who focuses on sustainable finance.

“It is promising to see evidence of what we have long known—that the energy transition promises to be an enormous opportunity in addition to a climate necessity,” she says.

White explains that the challenge will be ensuring the private sector seizes on that opportunity in pursuit of 1.5C scenarios, which are more likely to prevent catastrophic warming. Doing that, however, will require an extraordinary ramp-up of investment.

“We need to see both real-economy investment and bank financing in low-carbon energy sources more than quadruple this decade relative to fossil fuels,” she says.

BNEF analysts use a metric that tracks investment in the energy-supply system across a range of industries. The analysts have determined that the ratio of clean energy investment to fossil fuels needs to hit 4 to 1 by the end of the decade if the planet is to avoid the worst ravages of climate change as laid out in the Paris Agreement of 2015. That ratio was 0.8 to 1 at the end of 2021, according to BNEF.

Banks have faced considerable