International development banks are short-changing renewable energy projects, according to a new report.
Multilateral organizations—ranging from the Inter-governmental Panel on Climate Change (IPCC) to the United Nations itself—are among the entities pushing hardest for worldwide action to keep worldwide temperature change to within 1.5 degrees Celsius (2.7 degrees Fahrenheit) this century. But a critical new report, Small Steps Are Not Enough, shows that multilateral lenders are failing to do their fair share to make that happen.
The report said that none of the world’s seven largest multilateral development banks— a group that includes the World Bank, the European Investment Bank, and the Inter-American Development Bank—are lending money at a substantial enough rate that would limit global warming to that 1.5 degree target. The best, the African Development Bank, earned a grade of C, the report said. Two banks were graded with an F.
The report comes amid a rising tide of protests around the world calling for greater action from governments on climate policy. Development banks are on the front lines of the debate as they are often one of the biggest suppliers of risk capital to infrastructure and energy-production projects in developing countries.
“There are two main points,” Kat Kramer, global lead on climate change for advocacy group Christian Aid and the report’s co-author, told Fortune. “One is that funding for green energy projects is growing too slowly, and the other is that the development banks continue to fund fossil fuel energy.”
The second point is the one brought up most often by analysts following the sector. According to Alex Doukas from Oil Change International, public financing for clean energy totaled $55.4 billion over the five-year period ending last year. But that was almost matched by the $49.1 billion in financing for fossil fuel projects.
The overall trend is positive (but only slightly), Doukas told Fortune. Spending on clean energy went from 23 percent of all investments in 2014 to 36 percent last year, while fossil fuel spending dipped from 31 percent to 27 percent over the same period. But he said that transition is happening far too slowly.
“If you asked me back in 2014, when spending was 23 percent of the total, what it would need to be five years later, I would have said it should be at least 50 percent, if not more,” Doukas said.
Comparing figures is not perfect. Sonia Dunlop, a senior policy advisor with climate think tank E3G, noted that funding for a major project in one area can make trendlines “lumpy”—often showing healthy growth one year, an apparent slowdown the next—but she said that long-term trends are clear.
Though investments in coal mining have all but disappeared, analysts said multilateral banks still invest in companies related to the coal sector. Most investments are in the natural gas sector, which energy companies bill as a cleaner “bridge technology.”
But Doukas said that since natural gas projects have lifespans measuring in the decades, a plant built today will likely be in operation well past mid-century, which is when the IPCC says pathways to keeping global warming below 1.5 degrees should be phased out.
“As long as there is more or less a dollar of investment in traditional fossil fuels for every dollar spent on green energy we’re never going to get to where we need to go,” Dunlop said in an interview. Dunlop echoed the calls of all the analysts Fortune interviewed for this article in saying that multilateral banks should stop investments in so-called brown energy.
That may take a while, according to Xavier Sol, director of Counter Balance, a public finance watchdog group.
“Energy companies are some of the most effective lobbyists and there are still many countries that want to hold onto fossil fuels,” Sol told Fortune. “The world should be seeing a dramatic shift but so far we are just seeing minor changes.”