24 August 2021

David Turnbull,
David Tong,

Central Banks Still Fueling Climate Crisis: New Report

Twelve of the largest central banks around the globe continue to support climate chaos-causing fossil fuels through policy and direct finance, a new report released today finds. Ahead of an annual convening of central bankers in Jackson Hole, Wyoming later this week, the analysis strikes a critical contrast to promises in recent months by the same central banks to align their operations with climate goals.

Using a ten-point rubric to gauge central banks’ responses to the climate crisis, the new analysis finds that not one of the twelve major central banks analyzed comes close to alignment with the Paris Agreement on any of the criteria. The analysis reviews policies and financing of central banks from Canada, China, the European Union, France, Germany, India, Italy, Japan, Russia, Switzerland, the United Kingdom and the United States.

The criteria focus on three aspects of central banks’ functions:

  1. Asset management: central banks’ management of funds that they control to finance, or restrict finance to, fossil fuels;
  2. Rules and support for commercial banks: central bank actions that support or restrict financing of fossil fuels by commercial banks; and
  3. Policy and research: central bank statements and research and classification activities that could guide policy on fossil fuel finance in the future.

“Central banks have access to powerful tools to confront the climate crisis, but they aren’t using them. Instead of using their power to cut off finance for fossil fuels, they are making themselves busy tinkering around the edges of the climate crisis,” said David Tong, Global Industry Campaign Manager at Oil Change International and an author of the report. “The climate crisis is too dire and too urgent for such critical institutions to be dawdling when they could be leading the finance sector in a new, climate-safe direction.

While some central banks have taken steps to increase transparency and reporting of climate-related risks, the limited measures taken are overshadowed by inaction on financial flows to fossil fuels. Between 2016 and 2020, central banks have failed to prevent financial flows to fossil fuels on the order of USD 3.8 trillion from commercial banks. Financial flows to exploration and development projects, which will allow fossil fuel production to grow in future – as well as to other aspects of fossil fuel producers’ businesses – have continued to increase.

The report finds that, in their role as supervisors of commercial banks, central banks have largely failed to use the levers at their disposal to stem the flow of fossil fuel finance. Central banks have ignored proposals to use reserves requirements or prudential regulation to this end and have resisted calls to adjust their mandates in light of the climate crisis.

“Central banks’ roles have evolved over time. They reinterpreted their roles to confront the 2008-2009 financial crisis, and again in response to the COVID-19 crisis. Now, they must do the same to confront the climate crisis – not just as a threat to financial stability, but as a threat to humanity,” Tong of Oil Change International said. “If these central banks won’t act, the governments they report to must step in. They need to make it clear that central banks can be leaders in ending dangerous fossil fuel finance, rather than laggards propping up an industry driving our climate chaos.”

The report provides a series of recommendations to better align central banks’ activities with climate goals:

  • Governments should amend the mandates of central banks where necessary to give them the power to support the managed decline of fossil fuel production by facilitating an end to fossil fuel finance, in line with the Paris Agreement;
  • Central banks should:
    • adapt their asset management practices to exclude from their portfolios all fossil fuel production and fossil fuel intensive consumption sectors, further investment in which is found to be incompatible with the Paris Agreement;
    • adapt their regulatory practices with a view to eliminating commercial banks’ exposures to all fossil fuel production and fossil fuel intensive consumption sectors, further investment in which is found to be incompatible with the Paris Agreement; and
    • undertake research of climate-related risks, and require commercial banks to undertake research of climate-related risks and conduct the appropriate stress tests.

The report, entitled “Unused Tools: How Central Banks Are Fueling the Climate Crisis” was published by Oil Change International in partnership with, Alliance Climatique Suisse, BankTrack, Campax, Center for International Environmental Law, The Democracy Collaborative, E3G, Earthworks, Environmental Defense, Fossil Free Schweiz, Friends of the Earth United States, Laudato Si’ Movement, Public Citizen, Positive Money, Rainforest Action Network, Reclaim Finance, Recourse, Shift,, The Sunrise Project, Urgewald, and Women’s Earth & Climate Action Network. It can be found at

In response to the report, Danisha Kazi, Senior Economist at UK organization Positive Money, which has endorsed the report, said:

“There is a growing consensus amongst civil society that the world’s major central banks are failing to play their part in tackling the climate crisis. By propelling finance towards environmental destruction, they are placing both financial and planetary stability at risk.

“With its new remit to support net-zero and environmental sustainability, the Bank of England is in a particularly good position to lead the way, but it has yet to turn its words into actions and actively transition the financial system to a more sustainable footing.

“While central banks continue to shy away from their duty to the public, the most vulnerable, particularly communities in the Global South, will continue to bear the ever-intensifying brunt of their inaction.”

In response to the report, Paul Schreiber of Reclaim Finance said:

“Despite recognizing that climate change is fully relevant to their mandate and being bound by the Paris Agreement, central banks continue to help fossil fuel companies to benefit from cheap and ample funding. While the ECB and Bank of England are contemplating how to align part of their activities with the Paris Agreement, this report underlines that they will fail unless they adopt strong fossil fuel policies, starting with a clear cut of their support to companies that develop new fossil fuel projects. Failure to do so would come down to greenwashing.”

With a focus on the U.S. Federal Reserve, Tracey Lewis of said:

“This report is yet another reminder that central banks are the referees of our economy. When banks do bad — like financing fossil fuel companies hell-bent on planetary destruction — the ref is supposed to blow the whistle. Ahead of COP26 in November, the Federal Reserve must use their legal authority to manage climate risk and steer us off fossil fuels fast.”

With regard to Germany, Regine Richter, finance expert at Urgewald, commented:
“The Deutsche Bundesbank and especially the Federal Financial Supervisory Authority play an important role in setting rules for private banks and their financing. They must use this to stop financial flows into fossil fuel companies – and do it quickly. Bundesbank President Weidmann’s constant emphasis on ‘market neutrality’ is yesterday’s news and irresponsible in the face of the climate crisis.”