Disclaimer

The authors note that the analysis is based on data considered reliable, primarily from Banking on Climate Chaos 2025 and other established sources. Financial institutions were informed prior to publication and relevant feedback was incorporated. Accuracy and completeness are not guaranteed, and users should independently verify findings.

What is the energy supply financing ratio?

The Energy Supply Financing Ratio (ESFR) measures how banks balance financing between fossil fuels and sustainable power supply. Aligned with the International Energy Agency’s Net Zero Emissions scenario, it implies a 6:1 ratio by 2030. The ESFR focuses on financial flows, assessing both progress and distance from a net-zero trajectory.

Introduction

The report assesses whether banks are enabling the rapid transformation of the power sector required to meet climate goals. It analyses energy financing by 65 of the world’s largest banks from 2021 to 2024, comparing fossil fuel finance with financing for sustainable power supply, including renewables, grids, and storage.

Banks are far from financing the energy transition adequately

Banks are doubling down on fossil fuels compared to sustainable alternatives

Between 2021 and 2024, banks provided USD 3.29 trillion to fossil fuels versus USD 1.37 trillion to sustainable power supply, resulting in an average ESFR of 0.42:1. The ratio remained broadly flat, indicating no meaningful shift towards net-zero alignment. Only 14 banks financed more sustainable power than fossil fuels, and just one combined sufficient growth in sustainable finance with a sharp decline in fossil fuel finance.

Many banks moved in the opposite direction: 22 increased fossil fuel financing, 31 reduced sustainable power financing, and nine did both. Sustainable power finance focused mainly on generation (59%), with limited support for grids (36%) and storage (3%), despite these being essential enablers of renewable deployment. The findings show banks are not following the declining fossil fuel and rising sustainable finance trajectories required by net-zero pathways.

European banks: The best of a poor bunch

European banks outperform peers but remain far from alignment. Over 2021–2024, European banks achieved a regional ESFR of 0.70:1, compared with 0.35 for Japanese banks, 0.25 for US banks, and 0.22 for Canadian banks. Most banks with ratios above 1:1 are European. Performance varies within Europe, with French banks reducing fossil fuel finance more rapidly, while banks in Germany, Spain, and the UK increased fossil fuel support.

Financing that leaves most of the world behind

Sustainable power supply financing is highly concentrated geographically. About 93% went to OECD countries and China, with Europe, the US, and China receiving over 80%. Emerging markets and developing economies, despite representing a large share of population and future energy demand, received minimal financing. The report highlights high capital costs as a key barrier and stresses that banks must scale financing in higher-risk regions for a global transition.

From the frontline: Another way is possible

A case study of the East African Crude Oil Pipeline illustrates the social, environmental, and human rights risks linked to fossil fuel projects financed by major banks. Community-led renewable alternatives, such as decentralised solar mini-grids, demonstrate viable, people-centred energy solutions and highlight the opportunity for banks to redirect capital towards sustainable power systems.

Banks’ climate strategies overlook the transformation of the power sector

Tracking banks’ policies and commitments

While many banks have made net-zero or sectoral commitments, only eight have set specific financing targets for the power sector. Most rely on broad “sustainable finance” targets covering multiple sectors, making their impact difficult to assess. Only four banks publish an ESFR, limiting transparency.

Decrypting existing ratios

Where ratios are disclosed, methodologies often weaken their credibility. Common issues include excluding parts of the fossil fuel value chain, omitting bond and equity underwriting, or inflating sustainable finance by including technologies such as bioenergy, nuclear, or carbon capture. These practices obscure banks’ true alignment with net-zero pathways.

Conclusion and recommendations

The analysis shows banks remain far from a net-zero trajectory, continuing to prioritise fossil fuel financing while underinvesting in sustainable power supply. The report calls for banks to end support for fossil fuel expansion, sharply reduce fossil fuel finance, and significantly increase sustainable power financing. It recommends setting dedicated 2030 financing targets, adopting robust and transparent ESFR methodologies, and publishing progress annually to demonstrate alignment with a 6:1 ratio by 2030.