A new report from South Pole reveals a growing contradiction in the financial sector’s approach to climate action: while global financial institutions increasingly invest in green assets, most are unwilling to reduce their exposure to fossil fuels.
The 2024/25 Net Zero Report, based on a survey of sustainability leaders from 350 financial firms across 13 countries, highlights that 72% of institutions have no plans to reduce fossil fuel investments over the next decade.
At the same time, 44% intend to increase their exposure to low-carbon assets, and nearly 80% are more inclined to fund companies with clear climate transition plans.
According to Dr. Daniel Klier, CEO of South Pole, the findings underscore a troubling paradox: “Financial institutions want to have their cake and eat it too.”
He added that while financiers are ramping up climate-related engagement with their portfolio companies, they continue to fund fossil fuels, walking “a tightrope” between long-term climate goals and short-term investor returns.
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Unclear regulation remains a major obstacle, with 47% of respondents citing it as a barrier to achieving net zero targets.
Despite these challenges, 86% of institutions say they are on track or partially on track to meet their commitments, and 88% expect to increase engagement with portfolio companies on decarbonization within the next two years.
Dame Inga Beale, Chair of South Pole’s Board, noted that insurance companies are emerging as leaders in this transition.
“Those who proactively manage risk today will be better positioned for success tomorrow,” she said, highlighting stricter decarbonization standards in the insurance sector.
The report paints a picture of a financial sector navigating competing pressures—keen to appear climate-conscious while maintaining profitable fossil fuel investments.
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