Keeping to the 1.5ºC target
Fracking and the dangers of shale oil and gas
No longer giving giants a pass

We are facing an emergency: the scientists of the IPCC are agreed that our window of opportunity to limit global warming to 1.5ºC above pre-industrial levels is rapidly closing, with just a few years remaining. We must radically reduce our greenhouse gas emissions to reach global carbon neutrality by 2050. The EU and OECD countries, historically responsible for the majority of heating, must accelerate their efforts to reach this objective ten years earlier.

This can only happen with a total exit from fossil fuels, and not just from coal. Yet, according to the UNEP Production Gap report, countries’ planned fossil fuel production is 120% above the level that would limit warming to 1.5°C. If financial institutions do not act, fossil fuel companies will continue to easily access the financial services needed to not only operate existing facilities but also to develop new projects.

Indeed, an analysis of the policies adopted by banks, insurers, and investors demonstrated that not a single major financial player has adopted measures to put an end to fossil fuel development. If policies around coal exclusion are lacking, then the few adopted on certain oil and gas sub-sectors – tar sands, Arctic exploration and fracking – have even more gaps.

Banks have provided $2.7 trillion in financing to fossil fuel companies since the adoption of the Paris Agreement, with annual financing increasing since 2016. Moreover, the companies behind the biggest fossil fuel project under development have benefitted from nearly $1.6 trillion in financing, including 126 billion dollars from French banks for oil and gas projects.

This must stop. Financial institutions should adopt robust engagement and exclusion policies that prevent the expansion of oil and gas and set companies on the path to decarbonise their activities.

Read our demands on oil and gas

Keeping to the 1.5°C target

A growing number of financial institutions are committing to reach carbon neutrality by 2050 and to align their activities with the objective of 1.5°C. This is a laudable long-term objective – reaching it will depend on taking measures in the short term which substantially reduce financed emissions, rather than increasing them. Whether they’re working alone or jointly through coalitions of institutions such as the Net Zero Asset Owner Alliance, three pitfalls must be avoided:

  1. Delaying action while waiting for all data and methodologies necessary for a complete alignment of all financial services. The climate emergency necessitates drawing on the scientific knowledge at hand to act and to ensure immediate reductions in greenhouse gas emissions.
  2. Joining forces with financial institutions who are patently not sincere in their commitment to carbon neutrality. For example, amongst the memembers of the Net-Zero Asset Owner Alliance are Allianz, AXA, the Caisse des Dépôts et Consignations, SCOR and even Zurich, all of whom have coal policies. But the Alliance also includes financial institutions who have none or, like CalPERS, have only a very weak policy on a sector from which an exit is mandated by science.
  3. Adopt unrealistic climate scenarios which envisage a substantial excess of emission, rely on the development of hazardous massive carbon capture and storage, or don’t even aim for the targets of 1.5°C and carbon neutrality by 2050. The IEA’s scenarios are particularly problematic, but they are not the only ones: even the Network For Greening the Financial System scenarios – that gathers central banks and regulators – are inadequate.
Learn more about the IEA

Act now

No to expansion

Although we need to reduce production of oil and gas by 4 and 3% annually between now and 2030, the oil and gas industry itself has forecast a production increase of 7% between now and 2024.

New projects are planned or already in construction in every single gas and oil subsector. If they are realised, they will destroy our chances of keeping warming below 1.5°C. These projects are aberrations, given that our remaining carbon budget to keep heating below 1.5°C already prevents us from exploiting the entirety of prospected fossil fuel reserves.

The real test of financial institutions’ climate commitments will be ascertained in light of one simple thing: are they financing and insuring new fossil fuel production projects, and do they continue to finance, insure and invest in the companies carrying them out?

Unfortunately, the response is all too often yes, even for the riskiest, non-conventional oil and gas sectors – tar sands, fracked gas and oil, Arctic and deep-sea exploration. A growing number of financial institutions have recognised that any new coal project is incompatible with the carbon budget and have ended their support for these projects as well as the companies running them. The same logic must urgently be applied to oil and gas.

Read the ‘Five Years Lost’ report

Hitting the exits

Financial institutions who commit to align their activities with a 1.5C objective and to reach carbon neutrality by 2050 will only be able to get their in two ways: by no longer supporting companies who are themselves not on track for such alignment or by pushing them to rapidly transform themselves so that they end up aligning with these objectives.

However, we find myriad examples of contradictory promises and actions. For example, AXA, Amunid and Natixis voted against the climate resolution put to Total in 2020. This resolution asked the top French polluter to adopt decarbonisation objectives around its activities while it continues to massively invest in the development of new hydrocarbon projects.

While we must aim for an exit from oil and gas by 2040 within European countries and the OECD and by 2050 in the rest of the world, the financial institutions must call on companies to immediately reduce their investments to virtually zero. With greenhouse gas emissions needing to decrease by 7.6% a year, what is required is no less than immediate commitments to reduce their oil and gas production.

Total remains a great test for the credibility of financial institutions’ climate commitment and we call on investors to co-file a new climate resolution at the next Total’s AGM.

More about Total’s climate ambition
Principles For Paris-aligned Financial Institutions

Fracking and the dangers of shale oil and gas

new hydrocarbon projects to remain below the +1.5°C threshold
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the expansion of hydrocarbon production in North America
projects under development or prospected in the Arctic

Financial institutions must immediately stop all support to projects and companies active in intensive capital and carbon sectors and which involve the highest risks for populations, environments and the climate and in turn for financial institutions themselves: tar sands, Arctic and deep-sea exploration, fracked oil and gas all along the value chain, i.e. including pipines and terminals of LNG when they carry non-conventional oil and gas.

While the Arctic ice is melting at an unprecedented rate, fossil fuel companies are involved in at least 19 new projects, with a possibility that they might develop 200 more. Stopping them is a priority for the climate and biodiversity.

Another concerning development is taking place around non-conventional hydrocarbon basins, mainly shale gas, and to a lesser extent, tar sands in the US and Canada. This is an emergency: 85% of hydraulic fracturing and horizontal drilling between 2020 and 2025 will take place in North America, using up 26% of the global carbon allowance aimed at limiting global warming to 1.5ºC . Preventing this climate bomb from exploding means adopting sector- and value chain-wide exclusion policies, from extraction wells to LNG (Liquefied Natural Gas) export terminals.

Read our report on shale oil and gas

No longer giving giants a pass

Though some exclusion policies have recently surfaced, with announcements from Crédit Agricole and Natixis in May, these policies risk to replicate BNP Paribas’ mistakes and give a free pass to gas and oil behemoths, such as Total SA, Shell, Chevron, Exxon Mobil, and BP – 50% of these giants’ development plans from 2020 to 2024 are in shale oil and gas, and it is the same companies who are behind the majority of projects planned in the Arctic.

Financial institutions adopted partial exclusion policies for some fossil fuels. However, when exclusion thresholds are relative to total production or income, large corporations with highly diverse energy mixes, including oil and gas giants, fall through the cracks. This is a huge issue: stopping fossil fuel expansion is impossible if we ignore these leviathans.

Twenty-five companies handle 50% of supplemental hydrocarbon production between 2020 and 2024—these include industry titans. According to the Carbon Tracker Initiative, all oil giants are engaged in new projects which are incompatible with the Paris Accord goals. Total SA’s investments in hydrocarbon Exploration and exploitation are 18 times higher than there “low carbon” investments—a misleading category in which gas overshadows renewables.

Oil and gas giants are capable of single-handedly turning the Paris Agreement into a pipe dream. Financial institutions have no choice but to:

  • Suspend all financial services to oil and gas giants if they do not stop expanding and developing new fossil fuel projects; and
  • Use shareholder engagement and their power as a financial stakeholder to force oil and gas giants to adopt absolute greenhouse gas emission reduction goals across their activities, from scope 1 to scope 3, to limit global warming to 1.5ºC above pre-industrial levels.
Read our demands on companies’ engagement