- As EU calls on COP28 climate negotiations to make progress on stopping climate-harming finance flows, its own financial industry continues to fund fossil fuels and other carbon-intensive sectors, ActionAid’s report shows.
- Additional ActionAid Ireland research shows investments worth €5.7 billion in agribusiness and fossil fuels firms in the Global South are funnelled through Ireland
European banks have provided a staggering US$327 billion (€281 billion) of financing to fossil fuel and industrial agriculture activities in the Global South in the 7 years since the Paris Agreement was signed, a new report from ActionAid published at the COP28 climate summit reveals.
The new research also shows that the fossil and industrial agriculture industries in the Global South are receiving 4 times more financing from European banks than governments are receiving as climate finance from the EU.
European banks fuelling the climate crisis
The report, “European Finance Flows fuelling the climate crisis: The role of Article 2.1c under the UNFCCC” finds that annual financing provided by European banks to fossil fuel and industrial agriculture activities in the Global South comes to an average of US$46.7 billion (€40.2 billion) per year. This is 4 times the US$11.26 billion (€9.7 billion) annual average that the EU and its member countries have provided as the real value (grant-equivalent) of climate finance to countries in the Global South.
Article 2.1c of the Paris Agreement aims to make financial flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development.
ActionAid said today that the EU’s efforts to move the Article 2.1c agenda forward are both helpful and problematic. While it welcomes efforts to shift the world’s harmful financial flows, the report finds that the EU is also attempting to use the Article 2.1c agenda to try to reduce its own obligations to provide its fair share of grant-based public finance.
The world’s money is flowing in the wrong direction
Teresa Anderson, Global Lead on Climate Justice at ActionAid International and one of the report’s authors said: “The world’s money is flowing in the wrong direction. Banks often claim that they are addressing climate change, but their continued financing of fossil fuels and industrial agriculture is condemning communities in Africa, Asia and Latin America to the cruel combination of landlessness, deforestation, water pollution and climate change.
“European finance flows are a big part of the planet’s problem, channelling far more funds to the cause of climate change in the Global South than to the solutions. The EU is preaching water while still drinking wine.
Under parallel negotiations to develop a new post-2025 climate finance goal, developed and developing countries disagree on the extent to which private finance, including loans provided by banks, should count towards climate finance targets. For countries already being pushed into debt by the impacts of climate change, finance in the form of grants is the most useful type of support. Developing countries are understandably concerned that the EU’s efforts to green private finance.
ActionAid Ireland research, published in September this year, revealed Ireland is a significant channel for global institutional investment in fossils fuels and industrial agriculture, with funds registered here holding a staggering €5.7 billion (US$6.2 billion) in bonds and shares in climate harming activities in the Global South.
Ireland plays a somewhat unique and problematic role
ActionAid Ireland CEO, Karol Balfe, said: “Ireland plays a somewhat unique and problematic role within this European context of unsustainable funding by European banks. More than 1,200 multinational companies have established themselves in Ireland, drawn by its access to the European single market, an English-speaking workforce, and a very attractive corporation tax regime. It is completely by design that Ireland acts as a channel for international financial investment institutions. The figures flowing to climate harmful activities, via Ireland, to the Global South are also staggering.”
Ms Balfe added: “Ireland’s tax regime is problematic for efforts to tackle global poverty and the climate crisis. Most recently the UN Committee on the Rights of the Child called on Ireland to ensure that Irish tax policies were not undermining the ability of other countries to raise revenue to address poverty experienced by children in those countries.
“Our research shows that our tax regime is facilitating the flow of harmful finances damaging to climate change in the Global south. This comes at a cost for the world’s poor, particularly women, who are disproportionately affected by the climate crisis.”
The “European Finance Flows fuelling the climate crisis: The role of Article 2.1c under the UNFCCC” report calls for:
1. COP28 to make progress on the Paris Agreement commitments under Article 2.1c, through a series of measures including new regulations and policies to phase out financing to fossil fuels and other high-emitting activities such as harmful industrial agriculture
2. The EU and its Member States to significantly increase their public, grant-based finance to meet a fair share of their commitments under Article 9.1 of the Paris Agreement, and these contributions should not be conditional on Article 2.1c decisions and
3. The EU and its Member States to take domestic action to address its climate-harming finance flows, in particular by including banks and financial institutions in the Corporate Sustainability Due Diligence Directive (CSDDD) on human rights and environment.
ActionAid Ireland is also calling on the Irish government to ensure that it reviews and analyses relevant structures and processes to ensure that investment made through Foreign Direct Investment and international subsidiaries based in Ireland don’t undermine our climate and development objectives.