Santander announced on the 22nd of February several new measures regarding the coal sector, which were complemented a few days later by the publication of its updated Environmental and Social policy framework with other measures on fossil fuels. If this marks a slight improvement in its ambition, Santander still fails to commit to any rapid exclusion policy for its customers most deeply involved in coal and fossil fuel development. Santander still lags far behind many of its global peers.
1. What’s new
Santander’s new policy has the following new elements regarding coal financing:
- It plans to reach 0% exposure to thermal coal mining by 2030.
- It plans to exclude power generation clients with more than 10% of revenues dependent on thermal coal from 2030.
- It will further restrict its project financing towards coal-related project by now also applying its exclusions to coal-related infrastructures projects.
- Finally, it will not finance, anywhere in the world, any new client with projects of thermal coal mines.
Regarding oil and gas, Santander plans to stop financing:
- Any project involved in the exploration, development, transportation, construction or expansion of unconventional oil & gas (tar sands, fracking, coal bed methane);
- Any company with over 30% of revenues drawn from activities related to unconventional oil & gas and/or to Artic oil.
2. Our analysis: too little too late
Regarding project financing, Santander has improved its policy. It was already preventing the direct financing of any new coal mines and power plants, including the extension of operating plants and mines. It is now also preventing the financing of coal-related infrastructures. It is worth noting, however, that this is a minor sacrifice for Santander, which has only been involved in one deal considered controversial in the past decade (2015): Punta Catalina.
On its phase-out strategy, we positively acknowledge the decision of Santander to phase-out coal mining by 2030. This is line with climate science. However, we regret Santander has not committed to a real coal power phase-out: 10% is too high to be considered as a phase-out. We recommend a maximum limit of 5%. In addition, the metric used to calculate such exposure (% of revenues) does not allow for as precise an assessment as the coal share of power production for energy producers dependent on coal.
However, this should not mask Santander’s inability to question its existing customers in the short term. The bank channelled $5.7bn to 25 coal companies between October 2018 and October 2020. Without any new immediate exclusion criteria, the bank will be able to continue to support Glencore ($1.6 bn), which in 2020 mined over 123 million tons of thermal coal, RWE ($0.35 bn) and Duke Energy ($2.1bn) which respectively produce 23% and 27% of their electricity from dirty coal power.
In fact, with this new policy, nothing will prevent Santander from actually financing even more customers who are planning to develop new coal projects, such as PGNiG, TAURON, PGE or Energa in Poland as pointed out by Banktrack & Development Yes, Openpit mines No. This is incoherent and incompatible with any serious ambition to reach climate neutrality by 2050.
Santander must urgently fill this giant loophole in its policy and follow the lead of many of its global peers such as Crédit Agricole or BNP Paribas which exclude coal developers and request from companies the adoption by of a coal phase out plan by 2030 in EU/OECD and 2040 worldwide. Chosing stricter exclusion threshold such as those used by BBVA would also be beneficial.
On oil & gas, Santander extends its exclusion at the project level for unconventional oil and gas, including transportation projects. But it falls short in not covering ultradeepwater and LNG projects, let alone conventional ones, while all types of fossil fuel related development projects are incompatible with a 1.5°C climate objective.
Santander’s new policy also does not exclude oil & gas developers, even for the unconventional ones covered at the project level. The positive development lies in the 30% exclusion threshold for unconventional hydrocarbon activities. It remains unclear the exact threshold being used for companies with “significant reserves” (precise wording). However, such a threshold is still too high, considering these projects are the most environmentally damaging. In addition, no phase-out timeline for these sectors is mentioned, which is disappointing.
Santander’s Scores in the Coal Policy Tool
This table presents the coal scores of Santander based on five criteria of the Coal Policy Tool
3. Our conclusion
The adoption of a coal mining phase-out by 2030 is positive but there is still a long way to go for Santander to have a robust coal policy. The Spanish bank must urgently fill the giant gap in its policy which allows it to continue to finance existing coal customers, starting with the exclusion of all coal developers.
Similarly, we welcome the new restrictions at the project and corporate levels for unconventional oil and gas, but the next step must be the exclusion of all fossil developers. This is clearly a missed opportunity.