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It can be confusing. We’ve all heard buzz about banks refusing to invest in new oil and gas projects, yet simultaneously oil and gas continues to expand. These seemingly contradictory trends may make you ask: what’s really going on in fossil fuels finance? A recent article from ESG Clarity explores this question by revealing the true meaning behind many pledges to halt funding to new fossil fuels developments. The article explains using the example of HSBC:
“… it turns out HSBC’s policy only prohibits direct finance for specific projects, but not for the companies carrying out those projects. In fact, in the year since making its groundbreaking pledge, HSBC has helped raise almost $50bn for companies that are developing new oil and gas fields – the very thing the bank promised not to finance.”
If banks fund companies that develop new oil and gas but simply refrain from directly funding projects, what is the point of these pledges in the first place? The more cynical among us would argue that banks are attempting to court sustainably-minded clients and generate good press while continuing to support fossil fuels development. However, the article goes on to explain that banks argue that these policies are necessary as a transitional measure. That they essentially warn fossil fuels companies of what’s to come so they may adjust their behaviors ahead of time.
There may be some truth to this justification. Last week, Barclays made headlines when it announced its new energy policy which included a pledge to not finance new oil and gas projects directly. The policy also includes an annual reevaluation of investments in companies expanding fossil fuels and expects companies to have climate transition plans. Whether these policies represent true climate action or empty greenwashing is an open question that will be answered by how banks adapt their lending policies in the coming years. At the moment, however, it is important to read past the headlines and get into the details of bank lending pledges/policies.
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Photo credit: John Gomez – stock.adobe.com
