How Banks Fuel Fossil Fuels

Banks play an important role in the continuation and expansion of the fossil fuel industry, which in turn furthers the climate crisis and often leads to human rights violations. Banks contribute through both project and corporate financing. 

How General Corporate Financing (indirect) and Project Financing (direct) Compare

While banks argue they are not directly financing fossil fuel projects, they often fund the company leading such projects through general corporate financing, enabling their operations. The Office of the UN High Commissioner for Human Rights concluded that banks can be connected and responsible for human rights violations through the projects and companies they finance.⁴ Whether it is indirect or direct funding, banks’ financial support for the fossil fuel industry drives climate change and human rights abuses, making them responsible for their continuation and associated risks and harms. 

These actions are not only unjust, but they also undermine banks’ own climate commitments, exposing a contradiction between their public climate pledges and the reality of their financing decisions. While many of the largest banks have committed to meet net zero emissions by 2050, aligned with international guidelines like the Paris Agreement,⁵ they continue to fund fossil fuel projects. For example, six major banks, including JPMorgan Chase, Citi, Bank of America, Wells Fargo, Goldman Sachs, and Morgan Stanley, have provided over $1.8 trillion to finance fossil fuels since the 2016 Paris Agreement.⁶ In 2023 alone, these six banks provided $704 billion in fossil fuel financing, $347 billion of which went towards expanding the fossil fuel industry.⁷ This contradiction between the banks’ promises and their financing undermines confidence that they will act responsibly to transition away from fossil fuels and take responsibility for their actions in enabling this industry. 

It is important to note that the fossil fuel industry is not the only sector banks finance that leads to environmental and human rights concerns. Although essential for addressing climate change, the renewable energy industry has been following the same exploitative pattern as the fossil fuel industry. These extractive practices are rooted in systemic injustices, resulting in similar outcomes of environmental harm, extraction, exploitation, and human rights abuses. This is evident in the opposition from the Tohono O’odham, Hopi, Zuni, and San Carlos Apache peoples to the SunZia wind transmission plant, which cuts through their lands. While it is intended to be the largest clean energy project in the U.S., it can not be seen as a just alternative to fossil fuels as it still violates Indigenous Peoples’ rights. Without addressing the root causes of systemic injustices, the renewable energy transition will lead to the same ongoing harms of the fossil fuel industry. 

Case Studies

To illustrate banks’ role in violating Indigenous Peoples’ rights, here are a couple of key examples that underscore how banks finance the fossil fuel industry, which directly violates Indigenous Peoples’ rights. 

A notable example is the infamous case of the Standing Rock Sioux Tribe and their opposition to the Dakota Access Pipeline. Banks such as Wells Fargo, JPMorgan, and Citigroup, among many others, financed Energy Transfer and Sunoco Logistics Partners,⁸ of which owned the controversial project. The Dakota Access Pipeline project gained international attention in 2016 and sparked widespread grassroots protests, with the Standing Rock tribe leading the resistance. The movement garnered global solidarity, evidenced by over 2 million tweets calling to stop the pipeline and thousands of protesters joining the on-the-ground demonstrations. The protests received significant media coverage, leading to continued project delays, lawsuits, and $4.4 billion in losses incurred by the banks solely from account closures.⁹ 

Another example is PetroPerú, a state-owned fossil fuel company financially backed by Citigroup and JPMorgan Chase. Indigenous Peoples in the Peruvian Amazon, including the Wampís, Achuar, and Chapra Nations, have been actively opposing the expansion of PetroPerú’s fossil fuel projects on or near their territories.¹⁰ PetroPerú has been labeled a “serial polluter;” for example, in October 2024, a pipeline spilled 6,000 liters of oil, contaminating the water and food supplies for over 10,000 Indigenous Peoples.¹¹ 

Unfortunately, these are just a few of many instances where banks have directly or indirectly funded projects that trample on Indigenous Peoples’ internationally-recognized rights. By disregarding Indigenous Peoples’ rights to FPIC, banks not only violate human rights, but also spark international protests and resistance, which create material financial, regulatory, and reputational risk.  

Investor Concerns

Banks funding the fossil fuel industry, particularly when it infringes upon Indigenous Peoples’ lands and violates their rights, represents not only a moral failure but also a material risk for their company and investors. These risks can include reputational risks, project delays, and shutdowns due to litigation, protests, and regulatory shifts.¹²  Furthermore, the fossil fuel industry’s long-term viability is threatened by a finite supply of fossil fuels, resources market transitions toward renewable energy,¹³ and a growing interest in responsible investing. Respecting Indigenous Peoples’ rights and stopping fossil fuel expansion is not just a matter of justice, but also a strategic business decision. 

Investors can leverage their power to urge banks to adopt policies that commit to the UNDRIP and FPIC, reexamine the companies and projects they finance, and commit to a just transition as they phase out fossil fuels. 

This understanding drives IASJ and our affiliates to file shareholder proposals with major banks such as Wells Fargo, JPMorgan Chase, and Citigroup. These proposals focus on linking Indigenous Peoples’ rights with climate justice, urging companies to evaluate and improve the effectiveness of their policies and practices in respecting and upholding these rights. The initiatives have garnered significant support from shareholders who recognize the critical connection between responsible investing and the pursuit of climate justice.