‘The fight for climate justice and tax justice go hand in hand. Our broken global tax system is costing countries billions in public money and fuelling extreme wealth inequality, which in turn is accelerating climate breakdown and blocking action, leading to even more costly damages to the most vulnerable communities.’
Secretive financial practices are allowing banks to obscure the true extent of their fossil fuel investments, according to a new report from the Tax Justice Network. The study highlights the practice of “greenlaundering,” where banks use complex financial structures to disguise their ongoing support for fossil fuel industries.
The report analysed data by a coalition of groups working to end what it refers to as the “bankrolling of climate chaos and human rights abuses.” It uncovered that two-thirds of fossil fuel financing provided by the world’s 60 largest banks are granted to subsidiaries in a tax haven that specialises in allowing individuals and legal entities to hide their finances from the rule of law.
The Tax Justice Network explains that these subsidiaries, often shell companies, are set up in secrecy jurisdictions to receive loans and underwriting services. These funds are then transferred to other parts of fossil fuel companies operating elsewhere. The lack of transparency and accountability in these regions allows financial transactions to go unrecorded or disconnected from their ultimate beneficiaries, making it difficult to trace the flow of money back to fossil fuel companies.
Because these subsidiaries do not directly engage in fossil fuel extraction or production and are only intermediaries, they often evade regulatory scrutiny and exclusionary policies aimed at curbing fossil fuel investments. At the same time, banks can claim ignorance of the true nature of these entities when providing financing, thereby bypassing ethical and environmental guidelines.
The report shows how the exclusion policies of several banks, including Barclays, RBS, and Citigroup,fail to adequately reflect the full reality of how bank financing is often issued to and received by fossil fuel companies, “leaving the door wide open for fossil fuel companies targeted by the policies to continue to access financing.”
Franziska Mager, senior researcher and advocacy lead at the Tax Justice Network and one of the report authors, warned: “We’re raising the alarm on banks and fossil fuel companies greenlaundering their finances to hide how much money they’re truly putting into fossil fuels. The situation is much worse than we’ve been led to believe, and the guardrails put in place on fossil fuel financing are being easily jumped over.”
Alison Schultz, research fellow at the Tax Justice Network and one of the report’s authors, added: “The fight for climate justice and tax justice go hand in hand. Our broken global tax system is costing countries billions in public money and fuelling extreme wealth inequality, which in turn is accelerating climate breakdown and blocking action, leading to even more costly damages to the most vulnerable communities.”
The report is the latest in a series of investigations by the fair tax organisation that investigate how the broken global tax system and weak transparency standards around the world are undermining efforts to address climate action and are accelerating climate breakdown. The latest study is the first to explore the intersection between financial secrecy and banks’ fossil fuel financing.
The Tax Justice Network is urging governments to act on long-called-for, robust tax and financial transparency measures, including improved reporting standards, beneficial ownership transparency, and public country-by-country reporting.
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