Banks and financial institutions that have adhered to net-zero pledges are still investing heavily in fossil fuels, research has shown, leading to accusations that they are acting as “climate arsonists”.

The Glasgow Financial Alliance for Net Zero (GFANZ) initiative was launched by former Bank of England Governor Mark Carney as one of the UK’s major achievements in hosting the Cop26 UN climate summit in Glasgow in 2021.

The UK bragged at Cop26 that 450 organizations in 45 countries with assets of over $130 trillion had signed up to GFANZ to align their investments with the goal of limiting global temperature rise to 1.5°C per above pre-industrial levels.

But its members have poured hundreds of billions into fossil fuels since then, according to data compiled by lobby group Reclaim Finance.

GFANZ is made up of many smaller groups that require members to reduce their exposure to fossil fuels. But at least 56 of the biggest banks in the net zero banking alliance (NZBA) grouping have provided $270 billion to 102 fossil fuel companies for expansion, through 134 loans and 215 underwriting deals, according to Reclaim Finance. .

Paddy McCully, senior analyst at Reclaim Finance, said: “GFANZ members are acting like climate arsonists. They have committed to achieving net zero, yet continue to invest hundreds of billions of dollars in fossil fuel developers. GFANZ and its member alliances will only be credible once they up their game and insist that their members help bring the age of fossil gas, oil and coal expansion to a swift end.

GFANZ companies are also failing to divest from fossil fuels. In the zero net asset managers (NZAM) grouping, another part of GFANZ, the 58 largest members held at least $847 billion in assets in more than 200 fossil fuel companies, as of last September, according to the report published on Tuesday.

The report also found that few of the GFANZ members had put in place waterproof investment policies that would prevent them from financing new fossil fuel projects, even though they are all supposed to be shifting their portfolios to be in line with the goal of 1.5C, confirmed at Cop26. .

Lucie Pinson, CEO and founder of Reclaim Finance, accused the alliance of greenwashing. “It is the usual for most banks and investors. [involved in GFANZ], who continue to support fossil fuel developers without restraint, despite their high-profile commitments to carbon neutrality,” he said. “His greenwashing is even more damaging as it casts doubt on the sincerity of all net-zero commitments and undermines the efforts of those who are actually taking action for the climate.”

One of the biggest banks involved in GFANZ is HSBC, which announced restrictions on oil and gas financing last month. But it has approved 58 transactions worth $12 billion in capital for fossil fuel developers since joining a GFANZ pool in April 2021, according to the Reclaim Finance report.

An HSBC spokesperson told The Guardian: “HSBC’s aim is to reduce emissions in line with a 1.5C pathway, promote energy security and ensure affordability and access to energy, as part of our commitment to a net zero future. In accordance with our 1.5C-aligned 2030 financed emissions targets and updated energy policy, we will no longer provide new financing or advice for the specific purposes of new oil and gas fields or related infrastructure, or for the most carbon-intensive petroleum assets. carbon. To accelerate an orderly transition to net zero, we continue to support customers playing an active role in the energy transition, including through regular engagement in their transition plans.”

The spokesman added that fossil fuels are likely to continue to be needed during a transition period. “The International Energy Agency’s seminal Net Zero 2050 report outlines that an orderly transition requires continued funding and investment in existing oil and gas fields to maintain necessary production and security of supply, with 2020 funding levels maintained. until 2030 and halving thereafter. they said.

However, Reclaim Finance noted that the IEA has also made it clear that no new fossil fuel development can take place if the world stays within the limit of 1.5°C of warming, above pre-industrial levels. It has identified fossil fuel developers in the report as those engaged in expanding their assets, such as new drilling and new mining activities.

LGIM is the UK’s largest company in the NZAM initiative, yet as of September it had at least $13bn in assets in fossil fuel developers, according to the report.

An LGIM spokesperson told The Guardian: “LGIM is one of the founding members of the Net Zero Asset Managers Initiative established as part of the Glasgow Financial Alliance for Net Zero (GFANZ) and as part of our commitment to Zero Net Asset Managers Initiative. and in association with and on behalf of our clients, LGIM has established its own interim zero net AUM [assets under management] target of 70% by 2030, and continues to make progress towards this climate transition. Financing the transition is vitally important and certain fossil fuels will need to be part of the transition to renewable alternatives. By divesting from entire sectors like oil and gas, we will not achieve any real-world results and investors will lose their ability to exert positive influence through active engagement.”

A GFANZ spokeswoman said: “This report focuses on an important aspect of the energy transition. It is clear that much work remains to be done to ensure that the world is deploying capital in a manner consistent with a 1.5C path, which is exactly why GFANZ was created. Based on research GFANZ commissioned last year, we know that investment in renewables needs to be four times that of fossil fuels by 2030 to constrain climate change in line with the Paris agreement targets.”

She added: “GFANZ members will detail how they are financing the transition of the energy sector when they publish their interim targets and transition plans. This will allow the government, investors and civil society organizations to track progress. We call on financial institutions that are not in GFANZ to join the alliances that make up GFANZ to provide transparency and become part of the solution.”