- The largest banks of the Net-Zero Banking Alliance (NZBA) have provided $270bn in funding for fossil fuel companies since joining the Glasgow Financial Alliance for Net Zero.
- International banks like HSBC and BNP Paribas have received large fees for helping Saudi Aramco, the world’s largest oil producer, raise funds.
- In its annual report, HSBC recognises the dangers of greenwashing.
Glacial drift is arguably moving faster than the speed at which global banks are moving towards actual – rather than claimed – net zero.
Despite the pretty pictures on their websites, 56 of the largest banks in the Net-Zero Banking Alliance (NZBA) have provided $270bn in funding for fossil fuel companies since they joined Glasgow Financial Alliance for Net Zero (Gfanz).
The umbrella group for the seven net-zero initiatives for financial institutions was launched in April 2021 by UN climate envoy Mark Carney in collaboration with the UN Race to Zero Campaign.
“It is business as usual for most banks and investors who continue to support fossil fuel developers without any restrictions, despite their high-profile commitments to carbon neutrality,” warns Lucie Pinson, director and founder of the Paris-based think tank, Reclaim Finance, which published a January report into bank funding.
Unfortunately, the report does not analyse the bank funding levels prior to joining the NZBA, so it is unclear whether overall levels have increased, decreased or it is, as described, just “business as usual”.
The Reclaim Finance report is nonetheless revealing. Only a month after they had helped found the NZBA in April 2021, five of its founder members – BNP Paribas, Citi, HSBC, Mitsubishi UFJ and Société Générale – helped arrange a $10.5bn loan for oil giant Saudi Aramco, the world’s largest oil producer. Between them, they have provided $79bn in funding to fossil fuel companies since joining Gfanz.
Even though Saudi Aramco holds the dubious honour of being responsible for 3.1% of global annual greenhouse gas emissions, the world’s largest polluter has had no problems in finding banks to help it raise funds.
A month after that, BNP Paribas, Citi and HSBC again, joined by Goldman Sachs, JP Morgan, Morgan Stanley, SMBC and Standard Chartered Bank as well as domestic banks, led on its debut $6bn three-tranche Sukuk. All are NZBA members.
Subsequently, in May last year, HSBC and JP Morgan were lead banks on a $10bn refinancing for Saudi Aramco. They were joined by, among others, Citi, Deutsche Bank, Standard Chartered, SMBC and MUFG as book runners. Although Saudi Aramco hasn’t been in the capital markets since then, bank funding for the fossil fuel sector continues.
In mid-February 2023, HSBC was one of the joint global coordinators, along with BNP Paribas and Deutsche Bank as joint book runners for the stock market flotation of Adnoc Gas, the largest gas-processing complex in Abu Dhabi.
“Gfanz members are acting as climate arsonists. They’ve pledged to achieve net zero but are continuing to pour hundreds of billions of dollars into fossil fuel developers,” says Reclaim Finance senior analyst Paddy McCully.
NZBA: A turning point?
We are now at what Sylvain Vanston, executive director of climate investment research at MSCI, calls “a turning point”. Not because the banks have realised the danger posed by climate change, but rather that they have noticed that it could hit them in their pockets.
Recently, three climate-focused French non-governmental organisations (NGOs) declared their intention to sue BNP Paribas – which made $7.1bn by funding fossil fuel projects between April 2021 and August 2022 – over its support for fossil fuels and its contribution to climate change.
“A bank cannot claim to be committed to net zero while supporting new oil and gas projects,” says Lorette Philippot, campaigner at Friends of the Earth France.
The other two NGOs bringing the case to the Paris Judicial Court are Notre Affaire à Tous and Oxfam France. The case is likely to hinge on commitments that BNP Paribas made to reduce its financing for oil and gas extraction and production by 2030.
“BNP Paribas continues to write new blank cheques to the largest fossil fuel companies without setting any conditions for an oil-free, gas-free ecological transition,” says Alexandre Poidatz, advocacy officer at Oxfam France.
While cases against companies have been brought in the past – notably against energy companies TotalEnergies and Shell – it is the first time a case has been brought against a bank for its climate policies.
There is at least a glimmer of recognition that the game is up. Buried on page 70 of its 2022 annual report published last week, HSBC – which made $12.1bn by funding fossil fuel projects between April 2021 to August 2022 – is an admission that it can’t continue doing business in the way it has.
There was an attempt to pass some of the responsibility on to regulators, blaming a lack of consistency in green finance taxonomies. Ultimately, it admitted:
“If we are perceived to mislead stakeholders on our business activities or if we fail to achieve our stated net-zero ambitions, we could face greenwashing risk resulting in significant reputational damage, impacting our revenue-generating ability and potentially our access to capital,” it said.
The silence from both Gfanz and NZBA is significant. In fact, neither organisation has made any public statement for almost three months. “Gfanz and its member alliances will only be credible once they up their game and insist that their members help bring a rapid end to the era of coal, oil and fossil gas expansion,” says Reclaim Finance’s McCully.
Public pressure and encouragement haven’t worked, but there is a chance that law courts and declining revenues might.