EU lenders urged to stop oil and gas financing

A group of investors managing over $1.5 trillion worth of assets have warned that European banks are endangering the transition to a low-carbon economy and the growth of renewable energy if they do not stop financing new oil and gas fields this year. ShareAction, a responsible investment group, coordinated the letters sent to the heads of Barclays, BNP Paribas, Credit Agricole, Deutsche Bank, and Societe Generale. Signatories of the letters include Aegon Asset Management, La Francaise Asset Management, and Britain’s Local Government Pension Scheme.

ShareAction stated that the five banks and HSBC are the largest financiers of the top oil and gas companies that have expanded production between 2016 and 2021. However, HSBC had announced in December that it would stop directly financing new oil and gas fields, which ShareAction noted was a step in the right direction.

“Investors are putting these banks on notice that they will face increasing pressure if they do not take action soon to reverse their financing of new oil and gas,” said ShareAction’s Jeanne Martin.

Barclays stated that it believes it can make the biggest impact by working with clients and customers as they shift towards a low-carbon economy, including many oil and gas companies that are actively engaged in the transition. The bank also mentioned that it is lowering its financed emissions from energy. BNP Paribas announced new targets last month to hasten the shift to a low-carbon economy, including ending financing of new oil and gas exploration and production and reducing its exposure to gas. Credit Agricole has already ended financing of new oil extraction projects and aims to reach carbon neutrality by 2050.

A Societe Generale spokesperson has been quoted as saying that the bank would assess the letter once executives receive a copy and pointed to the bank’s targets to reduce its exposure to oil and gas production by 2025. Deutsche Bank stated that it has significantly reduced its engagement in carbon-intensive sectors since 2016 and has agreed on targets to reduce financed emissions by 2030 and 2050. The bank emphasised that it is focused on supporting its customers in their transformation towards becoming carbon neutral.

Despite banks tightening their lending criteria for fossil fuels and pledging to reduce financed carbon emissions to zero by 2050, environmental groups believe that they are not doing enough. The International Energy Agency stated in 2021 that investment in new oil, gas, and coal supply projects must be stopped to achieve net-zero emissions by mid-century.