The challenge of phasing-out fossil fuel finance in the banking sector

J. Rickman, M. Falkenberg (), S. Kothari, F. Larosa, M. Grubb and N. Ameli ()
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J. Rickman: University College London
M. Falkenberg: City University of London
S. Kothari: University College London
F. Larosa: KTH Royal Institute of Technology
M. Grubb: University College London
N. Ameli: University College London

Nature Communications, 2024, vol. 15, issue 1, 1-12

Abstract: Abstract A timely and well-managed phase-out of bank lending to the fossil fuel sector is critical if Paris climate targets are to remain within reach. Using a systems lens to explore over $7 trillion of syndicated fossil fuel debt, we show that syndicated debt markets are resilient to uncoordinated phase-out scenarios without regulatory limits on banks’ fossil fuel lending. However, with regulation in place, a tipping point emerges as banks sequentially exit the sector and phase-out becomes efficient. The timing of this tipping point depends critically on the stringency of regulatory rules. It is reached sooner in scenarios where systemically important banks lead the phase-out and is delayed without regional coordination, particularly between US, Canadian and Japanese banks.

Date: 2024
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DOI: 10.1038/s41467-024-51662-6

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