Opinion: Short-sightedness of major Swedish banks undermines climate goals
Major Swedish banks recently reported another quarter with record gains. At the same time, their multi-billion lending to companies and organizations contributing to climate change continues and their sustainability work shows significant shortcomings. It is high time that the banks redirected their efforts from short-term profit pursuit to long-term sustainable business, writes Jakob König, Leader of the Fair Finance Guide Sweden.
Fair Finance Guide Sweden's report “Banking on Thin Ice: Exposing Scandinavian Bank Finance for Fossil Fuels”, published earlier this year in collaboration with BankTrack, Fair Finance Guide Sweden, Fair Finance Guide Norway, Oxfam IBIS and ActionAid Denmark showed that Swedish banks are major financiers of the fossil fuel industry. Since the Paris Agreement was concluded, the major Swedish banks have continued to finance and lend approximately SEK 100 billion to fossil fuel companies each year. This includes, among other things, billion-dollar loans to coal companies that have recently expanded their coal power and to companies looking for more oil in the Arctic. The exception is Handelsbanken, which has almost completely stopped supporting the fossil fuel industry.
Our revelations have upset many Swedish bank customers. To date, over 38,000 people have emailed protests to their bank demanding improvement via the Fair Finance Guide's website. Banks should listen to that. It is customers' money and banking is an industry of trust.
Recently, the Minister of Financial Markets Åsa Lindhagen and the Minister of the Environment and Climate Per Bolund met with the banks to discuss their financial support for the fossil fuel industry. The call to the banks was to stop the financing of new extraction of fossil fuels. But it's not enough. If we are to achieve the climate goals, the fossil fuel companies must phase out their existing fossil fuel operations. The requirement for banks must be to stop supporting fossil fuel companies if they do not adopt phasing-out plans in line with the Paris Agreement.
"Politicians may hope that the banks will voluntarily stop supporting the fossil fuel industry"
Politicians may hope that the banks will voluntarily stop supporting the fossil fuel industry. That is unlikely, however as they make a lot of money from these investments. As long as the fossil fuel companies do not risk collapsing, which is not a risk for many years to come, these are safe profits for the banks. In addition, bank secrecy means that lending can continue with limited transparency. So why stop with something that is profitable and no one really sees? The banks' commitments so far are very limited and those that have been made contain large loopholes.
Many people probably think that Swedish banks are at the forefront of more climate-aware policies as Sweden as a country itself tends to be. According to Bloomberg, however SEB is one of the banks in Europe that lends the most to the worst polluters. Another European review shows that Nordea and Danske Bank are lagging behind many other European banking giants in terms of climate and biodiversity. Nordea, for example, is one of the few banks that is still considering financing new extraction work in the Arctic; something that even the European Commission called for an international ban on recently.
When it comes to funds, however, we have seen a dramatic change. Three out of four major Swedish banks have stopped investing in fossil fuel companies, at least those companies that are considered to have no plans to phase out fossil fuel operations in line with the Paris Agreement. This has taken place after strong protests from customers but would hardly have been possible if the banks had not had their own financial reasons to stop investing in fossil companies. In contrast to lending, it has been very profitable to stop investing in the fossil fuel industry, both in the short and long term. This development is expected to continue due to the poor future prospects of the fossil fuel industry.
The fact that the major Swedish banks are very profitable is not noticeable when it comes to the resources they invest in climate and sustainability work. There are still relatively few people in the banks who work with the management of this work. Our reviews show that this is completely inadequate. Earlier this year, we revealed the banks' continuing to fund and invest in companies connected to the devastation in the Amazon and in companies designated by the UN to support the military regime in Myanmar. When we ask questions about how banks take responsibility - in the absence of public information in their reports - there are often delays or no answers at all because there are not enough people who can answer. But worst of all - the answers show that the banks are not acting enough to take responsibility.
It is high time that the major Swedish banks prioritize sustainability work and shift their short-term profit pursuit to more long-term sustainable business. It will definitely pay off in the long run, not least through more satisfied bank customers who want to stay in a bank that takes responsibility for the climate.