Banks are under fire for failing to live up to commitments under the Glasgow Financial Alliance for Net Zero (GFANZ), aimed at speeding up the net-zero transition, and continue to invest heavily in fossil fuel projects, according to a report published this week by Reclaim Finance, a Paris-headquartered NGO.
Since joining the alliance, 56 of the biggest banks in the Net-Zero Banking Alliance (NZBA), part of GFANZ, have provided $270bn to 102 “major fossil fuel expanders”, via 134 loans and 215 underwriting transactions, suggested the analysis.
Similarly, 58 of the largest members of the Net Zero Asset Managers initiative, another GFANZ project, held at least $847bn of stocks and bonds in 201 major fossil fuel developers as of September 2022, said the report.
“Only a handful of the financial institutions have adopted policies that meaningfully restrict finance to new fossil fuel projects and companies developing new fossil supply projects since joining GFANZ,” said Reclaim Finance, whose senior analyst Paddy McCully suggested the alliance’s members were “acting as climate arsonists”.
this report shows our banks and our pension funds continue to provide billions in finance to companies involved in [fossil fuels]
“We know financing for fossil fuel expansion is bad for the planet, contradicts any serious net zero commitment and goes against the wishes of millions of savers who want their money tackling the climate crisis, not fuelling the fire,” commented Tony Burdon, CEO at Make My Money Matter, a UK campaign encouraging people to green their pensions.
"Staggeringly this report shows our banks and our pension funds, underpinned by our money, continue to provide billions in finance to companies involved in such activity,” added Mr Burdon. “Any financial institution who wants to be taken seriously on climate change must listen to the science, respond to customers and end their dangerous relationship with fossil fuel expansion.”
Banks’ response
HSBC, singled out by the report as the “largest fossil fuel expander” in the UK, announced new restrictions on oil and gas financing in December 2022. Reclaim Finance says the bank has approved 58 transactions worth $12bn in capital to fossil fuel developers since joining the NZBA in April 2021.
A spokesperson for HSBC said the bank aimed to “reduce emissions in line with a [1.5C] pathway, promote energy security, and ensure energy affordability and access, as part of our commitment to a net-zero future”. The bank will “no longer provide new finance or advisory for the specific purposes of new oil and gas fields or related infrastructure, or for the most carbon-intensive oil assets,” they added.
HSBC, like other banks cited in the NGO analysis to which The Banker spoke, referred to the International Energy Agency's seminal Net Zero 2050 report, published in 2021, as justification for the current state of play. The report “outlines that an orderly transition requires continued financing and investment in existing oil and gas fields to maintain the necessary output and security of supply – with 2020 financing levels maintained through 2030 and declining to half thereafter,” noted HSBC.
Across the Channel, BNP Paribas was listed as the biggest offender. “BNP Paribas contests the analysis by Reclaim Finance and the amounts presented in the report as products or financial services destined to projects linked to coal,” a spokesperson said. “In this report, 96% of oil and gas producers are considered as ‘developers’ that must no longer receive finance, yet these companies are best placed to invest massively in low-carbon energies and to accelerate the energy transition.”
BNP Paribas will prioritise reorienting financing towards low carbon technologies, said the spokesperson: “Between now and 2025, the group aims to reach €30bn of financing in renewable energy, a fourfold increase compared to 2015.”
Société Générale, also referenced in the report, did not want to comment. In October 2010, the bank set itself new goals aimed at better aligning its portfolios with a 2050 carbon neutral trajectory. This included an increase in its target to reduce its exposure to the oil and gas production sector from 10% to 20% by 2025 compared to 2019.
GFANZ said the Reclaim Finance report focused on “an important aspect of the energy transition” and that “a lot of work needs to be done to ensure the world is deploying capital consistent with a 1.5C pathway”.
“Based on research GFANZ commissioned last year, we know that investment in renewables needs to be four times the levels going into fossil fuels by 2030 to restrict climate change consistent with the aims of the Paris Agreement,” said a spokesperson for the alliance.
Whether financial institutions are on track with this aim should become clear when members publish interim targets and transition plans, they said.
