UK universities launch call for banking products that avoid financing fossil fuel expansion

The University of Cambridge has formally asked the banking sector for proposals for products and services that do not support the growth of fossil fuel-related activities. The University of Edinburgh is among 60 UK institutions supporting this request.

This request is called a Request for Proposals (RFP). An RFP is a document that outlines and describes a project and asks for bids from qualified service-providers to complete it. 

The signatories are looking for suggestions from banks and asset managers for cash and money-market products that follow the guidelines of the International Energy Agency’s Net Zero Emissions by 2050 Scenario. This plan charts a pathway to control the increase in global temperatures and keep it below 1.5°C. 

As one of the first UK universities to complete divestment from fossil fuels, we are pleased to support this opportunity for banks and asset managers to put forward cash and money-market banking products that avoid the financing of fossil fuel expansion.

Using their influence and capital, universities have a significant role to play in the transition toward a net zero economy. We are proud to join other UK universities to support the Cambridge request for proposals for net zero-aligned banking products.

UK universities threaten banks over fossil fuel financing [External]

Universities join forces on greener financial products

What can banks do to fight climate change? 

The extraction and burning of fossil fuels is a major cause of climate change. It is also a very expensive industry, especially when it comes to building new coal or gas-fired power plants or pipelines.

As a result, most of the external funding that supports fossil fuels companies comes from borrowing, mainly from sources like bank loans and bonds.  

Banking can and should play a critical role in reaching a net zero economy. By moving funding away from companies that want to expand fossil fuel production and instead channelling money towards renewable, sustainable technologies, banks can play a major part in the transition towards a net zero economy. 

Fuelling fossil fuel: Bond to bank substitution in the transition to a low-carbon economy [External] 

The work of Dr Theodor Cojoianu, Associate Professor in Energy Finance at the University of Edinburgh, explores the intersection between sustainability, data science and finance. His work on the role that debt plays in financing fossil fuel expansion has helped to advance thinking in the field of sustainable finance and accounting.

Dr Theodor Cojoianu, Senior Lecturer in Sustainable Finance

What services do banks offer universities? 

Universities depend on banks to deliver both financial and advisory services. Examples of financial products offered by banks include: 

• Deposit accounts 

• Managed accounts 

• Credit card services

• International transactions and payments 

Universities are large, complex institutions that operate globally, and rely heavily on banking services to keep money secure, process transactions and build capital for growth. Similar to other businesses that use banking services universities expect a modest profit on short-term deposits through cash and money-market products. These short-term deposit products are often used to finance debt, including those associated with fossil fuel companies.  

In short, those who signed the RFP are looking for cash deposit accounts and money market funds that avoid financing fossil fuel expansion. 

What are cash accounts? 

Cash accounts refer to the money a company or individual keeps on hand to meet short-term and emergency funding needs. These accounts can include short-term investments that allow customers to access their money quickly, usually in exchange for a smaller profit compared to a long-term investment.  

What are money market funds? 

A money market fund is a low-risk investment that offers a place to hold rather than grow savings. Most money market funds invest in short-term debt, rather than bonds or shares. Large organisations and institutions including universities will place capital into money-market funds for short periods of time and receive a small return. 

What is a Request for Proposals (RFP)? 

A Request for Proposals (RFP) is a document that outlines and describes a project and asks for bids from qualified service-providers to complete it. 

The group or organisation asking for the proposals is responsible for evaluating the feasibility and quality of the bids submitted, as well as assessing each bidder's ability to manage the project. The group submitting the proposals, (which in this case is the University of Cambridge along with the University of Edinburgh and others) can then decide if they want to accept one of the proposed bids.  

What is the objective of this RFP? 

The RFP from The University of Cambridge was published in February 2024. 

The signatories are seeking proposals from banks and asset managers for cash and money-market products that align with the International Energy Agency’s Net Zero Emissions by 2050 Scenario (NZE), which charts a pathway for limiting global temperature rise to 1.5°C.  

Those who signed the RFP want to encourage the banks to stop financing companies who are engaging in fossil fuel expansion.  This includes avoiding funding other banks or insurers who are themselves financing and/or facilitating fossil fuel expansion (also known as indirect investment). 

International Energy Agency’s Net Zero Emissions by 2050 Scenario [External] 

Why is the RFP significant? 

The fact that a wide range of universities are publicly supporting this RFP indicates a sector-wide demand for net zero aligned banking products. This collaborative approach sends a powerful message to banks and asset managers and incentivises them to prioritise products that support the net zero transition. 

What happens next? 

Banking providers and finance managers will have until 8 April 2024 to respond to the RFP. After that, the organisations which launched the RFP will review and evaluate each proposal. Signatories are not under any obligation to engage any further with the proposals put forward in response to the RFP. 

To find out more about the RFP, visit the University of Cambridge Banking Engagement Forum. 

The University of Cambridge Banking Engagement Forum [External] 

Learn more

Find out more about the University of Edinburgh's work on the role that finance and business can play to accelerate the transition to a sustainable economy.

Centre for Business, Climate Change & Sustainability