UK banks are taking the lead in Europe in financing new oil and gas projects, despite their wave of pledges to achieve net zero emissions by 2050.
According to to research by the non-profit organization ShareAction.
Funding these companies is a “lose-lose” for banks and ultimately consumers, says ShareAction. Either demand for oil and gas plummets and the bank’s assets lose value, or the bank suffers the economic fallout that experts say will ultimately result from burning fossil fuels and accelerating global warming. climate change. The Swiss Re Institute estimates that failure to reduce greenhouse gas emissions could result in 18% of global GDP be wiped out of the global economy by 2050, as increasing numbers of people are forced to migrate and supply shortages increase.
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If global warming is to be kept below 1.5°C above pre-industrial levels, as outlined in the 2015 Paris Climate Agreement, new investment in oil and gas should have come to an end. by the end of 2021, according to the International Energy Agency.
In addition to UK banks, ShareAction analyzed 20 other European banks and their funding of the 50 largest upstream oil and gas companies. Overall lending in 2021 was 48% lower than the previous year, but that drop shouldn’t be interpreted as progress, says Xavier Lerin, senior director of research at ShareAction. Lerin described 2020 as an “outlier” because of Covid-19.
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Average annual funding for all banks between 2016 and 2019 was around $61 billion, up from a total of $55 billion in 2021, meaning oil and gas funding “remains in line with before the pandemic,” says ShareAction. Three of the five UK banks, HSBC, Standard Chartered and Natwest, have increased their fossil fuel funding from their pre-pandemic average – HSBC by 7%, and Standard Chartered and Natwest by 24% and 63% respectively.
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Banks’ appetite for investing in fossil fuels is no secret. In March 2021, the Rainforest Action Network find that the world’s 60 largest banks had provided $3.8 billion in financing to fossil fuel companies since the 2015 Paris Agreement. Recent net zero pledges don’t appear to have a huge impact on investment decisions. investment. All banks in the study became signatories to the UN’s Net Zero Banking Alliance (NZBA) last year, which commits members to achieving net zero by 2050 and setting 2030 targets in 18 months after joining.
The study shows “how far banks have to go despite their commitment to lofty net-zero goals,” says Beau O’Sullivan, of campaign group Bank on our Future. “We need to start looking at them on the basics: oil and gas expansion is absolutely not compatible with a net zero future.”
The two biggest funders of oil and gas expansion were British banks. HSBC, which was last month bound to an agreement with Saudi Aramco, paves the way. Since 2016, he has provided nearly $60 billion to oil and gas companies, despite being one of the founding signatories of the NZBA. Barclays came second with $48 billion in investments.
“We are committed to working with our customers to achieve a transition to a thriving low-carbon economy,” HSBC insists, highlighting the bank’s policy on phasing out thermal coal. The policy, announced in December, includes plans to stop financing thermal coal in European and OECD countries by 2030, and globally by 2040. Later this month, the bank expects publish fossil fuel funding reduction targets in line with the goal of keeping global warming below 1.5°C.
Britain’s banking sector is missing out on the opportunity to show leadership, O’Sullivan says, while institutions in other countries are moving much faster. The French bank, La Banque Postale, has announced a goal of net zero emissions in 2040 and Company commitment to completely exit the oil and gas market by 2030 supersedes his government’s climate ambitions.
Natwest is one of the few European banks to have begun restricting funding for oil and gas projects. Lending to fossil fuel projects now represents less than 0.8% of Natwest’s total lending, a spokesperson said, adding that it was aiming to fund £100bn of climate and sustainability funding from 2025.
As Lerin points out, however, while green finance is important, it should replace, not add to, fossil fuel finance: “Green assets are not going to offset emissions from brown assets…we need consistency. you can’t keep [financing] both”.
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