Financial Institutions Eager for Decarbonization but Hesitant to Cut Fossil Fuel Investments

A recent report from South Pole has highlighted a paradox within the financial sector. While financial institutions (FIs) globally are expressing a commitment to decarbonization, many hesitate to reduce their fossil fuel investments. This contradiction was unearthed through insights gathered from sustainability managers of 350 financial institutions across 13 countries.

According to the findings from South Pole's 2024/25 Net Zero report, which is based on extensive surveys, nearly three-quarters (72%) of these institutions do not plan to decrease their involvement with fossil fuels over the next decade. Meanwhile, approximately a third (27%) are making more conservative claims concerning their net zero strategies and environmental impact statements. A significant number (47%) identified unclear regulations as a primary barrier to their net zero progress.

Interestingly, as the world continues to grapple with climate change, nearly half (44%) of the financial intermediaries surveyed are looking to step up their investments in green assets over the next ten years. Furthermore, a large majority (approximately 80%) find companies with a climate change plan more appealing for financing. About 88% indicated that they intend to enhance their commitment to decarbonization among their portfolio companies in the next two years, with 44% asserting they would substantially boost this engagement.

Dr. Daniel Klier, CEO of South Pole, emphasized that these survey findings reveal a willingness from financial institutions to support investments in green infrastructure, and an openness to increase their commitments to resilient investments. However, he also noted that the sector is not actively shifting away from fossil fuel financing, summarizing the situation as wanting to