Why in News?

• The 2025 Fossil Fuel Finance Report by the Banking on Climate Chaos Coalition reveals that the world’s 65 largest banks collectively committed $869 billion to fossil fuel companies in 2024, up from $707 billion in 2023.
• This growth, including the involvement of India's SBI, has sparked global concerns over climate goals, especially amid policy rollbacks and increasing global temperatures.

What’s in Today’s Article?

• Key Highlights of the Report
• Contradictions and Policy Backtracking
• India's Coal Financing Blind Spot
• Long-Term Concerns
• Cumulative Trends since Paris Agreement
• Conclusion

Key Highlights of the Report:

• Rising fossil fuel financing:
  • Global financing surge: In 2024, global fossil fuel financing increased by 22.8% over 2023.
  • Top contributor: JPMorgan Chase topped the list, contributing $53.5 billion, a $15 billion increase from 2023.
• SBI’s climate commitments vs actions:
  • Commitments:
    • State Bank of India (SBI) aims for net zero by 2055.
    • Target of 7.5% green advances by 2030 of domestic gross advances.
    • As of March 2025, SBI had extended ₹20,558 crore in sustainable finance.
  • Actions: The report highlights that SBI's position rose to 47th rank, with a total fossil fuel financing of $2.62 billion, marking a $65 million increase from 2023.

Contradictions and Policy Backtracking:

• Policy rollbacks in global banks:
  • American lender Wells Fargo scrapped plans to become net zero by 2050.
  • European banks, earlier seen as climate-progressive, also showed weakening sector policies.
  • Six largest US banks exited the UN Net-Zero Banking Alliance.
• US policy shift under Trump administration:
  • Withdrawal from Paris Agreement (effective early 2026).
  • Exit from the Network for Greening the Financial System.
  • Proposed legislation to cut clean energy tax incentives.
  • This rollback comes despite 2024 being the hottest year ever recorded.

India's Coal Financing Blind Spot:

• As per Climate Risk Horizons, Indian banks largely lack coal exclusion policies.
• Only Federal Bank and RBL Bank among BSE’s top 1000 banks have such policies.
• Despite renewables now being cheaper than coal, banks continue fossil fuel investments.

Long-Term Concerns:

• Lock-in effect of infrastructure:
  • As per IEA 2024, achieving net zero by 2050 demands halving fossil fuel investment by 2030.
  • New investments risk locking economies into decades of fossil fuel dependency.
• Mergers and acquisitions (M&A) financing:
  • Acquisition-related fossil fuel financing rose to $82.9 billion.
  • Although not directly creating new infrastructure, such financing strengthens fossil fuel companies’ market dominance, delaying the global phase-out essential for climate mitigation.

Cumulative Trends since Paris Agreement:

• From 2016–2025, the 65 banks have contributed $7.9 trillion in fossil fuel financing.
• Since 2021, $3.3 trillion has been lent to fossil fuel businesses — a persistent trend despite global climate urgencies.

Conclusion:

• The rise in fossil fuel financing by global and Indian banks in 2024 signals a critical policy regression against the backdrop of an escalating climate crisis.
• While financial institutions proclaim net-zero targets, the widening gap between climate pledges and actual financing behavior underscores the urgent need for enforceable climate-aligned banking regulations.
• This is especially important as time runs out to meet global sustainability commitments.