Universities under pressure to cut ties with fossil fuel-linked banks

Universities’ commitment to divest from fossil fuels is being undermined by the other financial relationships and broader ties they maintain with fossil fuel-linked banks, climate activists and student campaigners claim in a growing series of protests. 

After faith-based organisations (35.4 per cent), universities are the second biggest group (16.4 per cent) to fully or partially divest from fossil fuels, with more than 260 educational institutions globally making such a commitment, according to the Global Fossil Fuels Divestments Database, which tracks divestment pledges from more than 1600 organisations in sectors such as education, philanthropy, health, pension funds, governments and non-profits.  

Richard Brooks, climate finance director at Canadian non-profit Stand.earth, which maintains the database, says the past four years have seen a “big wave” of divestment commitments coming from “conservative” universities with large endowments such as Oxford, Cambridge, Harvard, Toronto, Princeton and New York.

However, climate campaigners and student activists say divestment is largely symbolic and have called on universities and student unions to go further in cutting ties with fossil fuel-linked banks. 

“There are so many ways that universities are still tied to fossil fuels, and can be an accomplice in greenwashing and helping maintain the brand and image of big banks,” says Dani Michie, digital organiser at Change Course, a Canadian youth-led non-profit which is calling on universities and student unions to close accounts with the big five Canadian banks because of their ties to fossil fuels, and move to credit unions. It is also calling for the removal of RBC On Campus kiosks and other on campus bank branches, and to end bank sponsorships of university events and awards. 

On March 7, according to Canadian media, students from the University of Ottawa joined 13 other universities in a nationwide protest against Canada’s largest financial institution, RBC. The protest called on the bank to stop funding fossil fuel projects, such as the Coastal GasLink pipeline, which students say violates indigenous rights. According to media reports, the protest included a sit-in at the RBC On Campus branch at the University of Ottawa.

It is not the first time that students at the university have challenged the presence of RBC On Campus. According to a post on Change Course’s website, a group of student leaders from Climate Justice University of Ottawa, the University of Ottawa Indigenous Student Association and the University of Ottawa Students’ Union met with RBC back in November to discuss the RBC On Campus branch, which they claimed was “a clever ploy” by the bank to attract more student customers under the guise of “supporting financial literacy”. 

Students critical of RBC’s climate record

The post said the branch had displaced students and encroached on in-demand student study space. They also criticised the bank’s climate track record and financing of projects like the Coastal GasLink pipeline, which they say is opposed by the Wet’suwet’en, a First Nations people who live in the north-western central interior of British Columbia, which the pipeline passes through.

In 2022, RBC CEO David McKay defended the bank’s funding of the controversial gas pipeline, which will carry natural gas from the province’s north-east to a massive liquefied natural gas processing facility on the west coast, saying it had been extensively reviewed by regulators and had the support of several elected First Nations groups along the route. 

However, climate non-profit Stand.earth says the pipeline lacks consent from Wet’suwet’en hereditary leadership, whom it says are the rightful titleholders of the land. 

A spokesperson for RBC told The Banker the main purpose of its On Campus branches, which are normally located in spaces operated by student unions, is to provide convenient access to banking services and financial advice for students. 

The spokesperson said it had engaged in virtual or direct outreach with 20 to 30 students at the University of Ottawa. “We heard their issues directly, and had some constructive discussions and are open to having more dialogue,” they said.

Everyone recognises the need to accelerate the transition to net zero, the spokesperson said, pointing to a recent commitment RBC made to treble its investment in renewables.

“We bank all sectors of the economy,” the spokesperson said, “and our involvement with the energy sector goes back decades, even a century. We’re proud of the work we’ve done and the relationships we have with clients in our sectors.” 

However, Michie claims RBC is trying to promote itself as a “sustainable brand” by financing sustainability courses, competitions and projects at universities and business schools, while also financing fossil fuel projects such as the Coastal GasLink pipeline.

“By consistently showing up and drawing these connections between RBC and the billions of dollars that it pours into fossil fuels it won’t be so easy for it to come onto our campuses and brand itself as sustainable,” says Michie.

While most students do not immediately make the connection between climate and banks, Michie says most students experienced the climate crisis first-hand last summer as wildfires in Alberta produced smoke across most of Canada. That personal connection made them more interested in what they could do to try to mitigate the crisis on their campus, she says.

RBC says its involvement in activities such as sustainability courses on campus is important in ensuring an effective transition to net zero, by addressing where challenges are and providing solutions.

Universities’ banking choices unpopular with students

The rhetoric on climate change and fossil fuel financing is ramping up on university campuses not just in Canada, but also the UK, where more than 100 universities have either partially or fully divested from fossil fuels, but are now under pressure from students, staff and climate campaigners to take further action.

Last year, the UK charity, Make My Money Matter, which campaigns against pension funds and banks investing in fossil fuels, published research highlighting the ties between UK universities that had committed to divesting from fossil fuels, but that continued to hold a current or cash deposit account with banks linked to fossil-fuel financing.

Based on Freedom of Information requests, as well as information gathered from universities’ websites and reports, its research revealed that each of the 95 UK universities on People and Planet’s divested educational institutions’ list as of July 3 last year, had a relationship with one of the UK’s big five High Street banks, Barclays, HSBC, Santander, NatWest, and Lloyds, which collectively, according to the charity, had provided $419bn to the fossil fuel industry since 2016. This figure is based on data from the Banking on Climate Chaos report published by the Rainforest Action Network, BankTrack and other climate non-profits.

Almost three quarters (73 per cent) of the 95 UK universities, according to Make My Money Matter’s research, bank with Barclays, which it says is “Europe’s biggest fossil fuel funder since 2016”, according to data published in the BOCC report.

The banking choices of universities not only undermine their divestment commitments, they are also unpopular with students, the charity says.

According to a poll it carried out in September, in partnership with Students Organising for Sustainability UK, out of approximately 780 undergraduate, postgraduate and PhD students, 75 per cent felt their university had a responsibility to tackle climate change, while 60 per cent did not want their university to choose a fossil fuel funding bank. Almost one third (29 per cent) of students said they would be uncomfortable continuing their studies if they discovered their university used a fossil fuel funding bank.

NatWest, Lloyds and Santander did not respond to requests for comment. HSBC declined to comment. In a statement, Barclays said it is privileged to bank and support UK universities and welcomes their engagement.

The bank said it recently announced that it had stopped direct financing of new oil and gas projects, and that its capital and resources are focused on scaling low-carbon technologies and energy clients engaged in transition with a $1tn target of sustainable and transition finance.

“As the number two clean energy adviser globally, we are playing a significant role towards financing real world decarbonisation,” Barclays said. 

However, Nat Gorodnitski, campaign manager at Breaking the Bank, which leads campaigns at universities against fossil fuel funding, says Barclays was forced into alignment with other European banks only in regards to direct project financing, and still lags behind banks on climate in other ways. “It’s walking a marathon when we need banks to be sprinting,” they say.

Universities other ties with fossil-fuel linked banks

But it is not just about who universities bank with. “There are so many other ties,” says Gorodnitski, pointing to universities where banks such as Barclays are one of the key employers advertised on their departmental pages.

“That’s an example of something that we would ask the institution to remove, because it basically says we as a university, an academic institution that is respected in our communities, and respected for our research globally, are endorsing Barclays by putting our name and associating us with them,” they say.

Research conducted by Make My Money Matter highlights a number of partnerships between UK banks such as HSBC and Barclays and UK universities. Some of these partnerships take the form of research in areas such as agri-climate to deliver “farm-level emissions data” or sponsorship of student societies.

But Gorodnitski says any social licence that a university provides to a bank that is propping up the fossil fuel industry is a cause for concern. “Universities have a commitment to the Paris agreement. Their values often say they uphold sustainability and that they’re working on climate change and then they have these cosy relationships with banks and fossil fuel companies,” they say.

In terms of what student campaigners want, Gorodnitski says ideally universities would put their money where their mouth is in terms of their leading climate research and the values they have.

Climate activists and students are now watching with interest to see what emerges from a request for proposal issued last month by treasurers from 60 leading UK universities and higher education trusts who have called on banks to develop innovative cash deposit and money market products that do not contribute to the construction of new coal- and gas-fired power plants in OECD countries. 

Anthony Odgers, CFO of Cambridge University, which led the RfP, says its call to action is as much about challenging the use of universities’ cash deposits and investments to finance the power sector, as it is about oil and gas. “Gas power plants, because of the leakage of methane, can have as bad an effect as coal plants. We want to stop new fossil fuel expansion, which will lock in demand for ages,” he says.

While there are a lot of responsible investment mandates related to equity, Odgers says most of the new capital for fossil fuel expansion comes from banks and the bond market. 

Brooks says Stand.earth is working with Cambridge University to develop a low-carbon/fossil-free bond index for universities and other institutions to help them implement their divestment or climate action plans and commitments. “There are several low-carbon fossil-free equity-based funds but very few fossil-free bond indices,” he says. “If successful, this will make it easier for universities to take the leap.”

As custodians of significant financial assets, universities have been trying to find a credible cash deposit or money market product, which is just not available at the moment, says Heather Davis, head of group treasury at the University of Cambridge. “It will be interesting to see what comes out of the RfP. There may only be a handful of banks that can meet our needs. But it’s raising awareness and making banks and asset managers think about what they can do. In that respect, it’s very exciting,” she says.

As a treasurer, Davis says she is approached on a regular basis by banks with products that they term green deposits, where funds are ring-fenced for activity that supports sustainable initiatives. But often the returns on these investments are much lower than traditional deposits. “They don’t go far enough,” she says. “The university wants to make much more of an impact at the entity level of the bank as they still contribute to the financing of fossil fuel expansion.”

Odgers says it is unlikely that higher education institutions will move everything into the new cash deposit or investment products overnight. “That wouldn’t be practicable,” he says. “However, as this idea evolves and develops and becomes more widespread, hopefully people will be able to put more money into it and they will cover a wider range of needs.”

The desire to manage money in a way that does not contribute to the financing of fossil fuel expansion, and that aligns with the International Energy Agency’s net zero emissions scenario by 2050, is embedded in the DNA of Cambridge, says Odgers. “Both students and staff are keen on this,” he says, adding that it is not just driven by student activists.

Gorodnitski says that ideally the RfP issued by Cambridge and other UK universities would result in a banking provider that agrees to move away from fossil fuel funding.

“We’ll have to basically decide, are we asking institutions to move to a bank like Lloyds that still finances fossil fuels, but not to the same degree, which doesn't feel like enough,” they say. “It might end up being that institutions move as much money as possible into a variety of sources.”

David Hayman, campaign director at Make My Money Matter, which says it encouraged a number of UK universities to sign up to Cambridge’s RfP, hopes it will result in more universities depositing or investing their money with building societies not linked to fossil fuel financing.