{"id":33266,"date":"2024-05-07T17:09:24","date_gmt":"2024-05-07T15:09:24","guid":{"rendered":"https:\/\/reclaimfinance.org\/site\/?p=33266"},"modified":"2024-05-15T11:24:06","modified_gmt":"2024-05-15T09:24:06","slug":"low-carbon-financing-the-tree-that-hides-the-forest","status":"publish","type":"post","link":"https:\/\/reclaimfinance.org\/site\/en\/2024\/05\/07\/low-carbon-financing-the-tree-that-hides-the-forest\/","title":{"rendered":"Low carbon financing: failing to see the forest for the trees"},"content":{"rendered":"

Only 17.3% of the financing provided by French banks to the 5 largest European oil and gas companies (1) went to their \u00ab\u00a0low carbon\u00a0\u00bb activities (US$7.1 billion) between 2020 and 2023, rather than their fossil fuel activities (US$34.2 billion). Financing dedicated to \u00ab\u00a0low carbon\u00a0\u00bb projects or subsidiaries accounted for just 7.5% of the overall financing. Using new figures, Reclaim Finance reveals that French banks\u2019\u00a0 new financial support to these companies is not being used to finance the transition, despite their claims. While analysis of the climate strategies of these companies<\/a><\/span> shows that they intend to mainly invest in oil and gas, there is only one solution to ensure banks align their practices with their rhetoric: stop financing\u00a0 these companies until they stop developing new fossil fuel projects.<\/b><\/p>\n<\/div>

French banks are among the largest financiers of the biggest oil and gas developers. They provided over US$67.5 billion in financing between 2020 and 2023 to 12 of the world’s largest integrated oil and gas companies (2), despite being aware of their massive fossil fuel development plans.<\/p>\n

After contesting the first Net Zero for 2050 scenario by the International Energy Agency (IEA) published in May 2021, which projected an end to new oil and gas fields after January 1, 2022, with LNG included in the 2022 and 2023 versions, French banks finally acknowledged, albeit sometimes timidly, the incompatibility of these new projects with the goal of limiting warming to 1.5\u00b0C and with their own climate commitments.<\/p>\n

However, they continue to largely defend their support for the largest, and especially the European, oil and gas companies, in the name of diversification and their ability to finance the transition.<\/p>\n

Reclaim Finance wanted to examine this claim,\u00a0 comparing for the first time the financing allocated by the 4 main French banks to the \u00ab\u00a0low carbon\u00a0\u00bb activities of 12 of the largest oil and gas companies globally with the financing allocated to their fossil fuel activities (upstream, midstream, downstream).<\/p>\n<\/div>

See methodology<\/span><\/a><\/p>\n<\/div>

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\u00ab\u00a0Low carbon\u2019s\u00a0\u00bb minuscule share of financing<\/h2><\/span>
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On average, 82.7% of the financing provided by French banks to the 5 largest European companies – BP, Eni, Equinor, Repsol, and TotalEnergies – went to fossil fuels. In the worst case, \u00ab\u00a0low carbon\u00a0\u00bb activities received just 11.1% of financing (BP).<\/p>\n

The percentage allocated to \u00ab\u00a0low carbon\u00a0\u00bb drops from 17.3% to 15.0% when the 2 major US companies and national oil and gas companies are included (3).<\/p>\n

However, it is possible to allocate financing specifically to a company\u2019s \u00ab\u00a0low carbon activities by financing certain projects or acquisitions in the low carbon sector. This is largely the case for the French banks\u2019 \u00ab\u00a0low carbon\u00a0\u00bb financing for Equinor, which received 95.9% of its \u00ab\u00a0low carbon\u00a0\u00bb financing in this way. However, due to the levels of corporate support provided, targeted support for \u00ab\u00a0low carbon\u00a0\u00bb activities remains proportionally less, representing 49% of the support received by Equinor from French banks between 2020 and 2023.<\/p>\n<\/div><\/div><\/div>

Breakdown of financing to
\nTotalEnergies, BP, Eni, Equinor and Repsol per bank<\/strong><\/p>\n<\/div>

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Banks absent from guaranteed fossil-free deals<\/h2><\/span>
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TotalEnergies, along with Equinor, Repsol, Eni, and BP, is one of the few companies to have raised targeted financing for \u00ab\u00a0low carbon\u00a0\u00bb activities.<\/p>\n

BNP Paribas was the only French bank to participate in BP\u2019s dedicated \u00ab\u00a0low carbon\u00a0\u00bb financing, while Cr\u00e9dit Agricole was the only French bank to participate in\u00a0 two of Eni\u2019s targeted \u00ab\u00a0low carbon\u00a0\u00bb financing requests, for a total amount of US$585.6 million raised by Eni. Eni, however, has sought targeted finance on several occasions, with 6 calls for a total of US$841.2 million between 2020 and 2023, 4 of which involved only Italian financial actors. French banks did provide significant financing for Eni, with US$9.0 billion between 2020 and 2023 for fossil fuel activities. Even BNP Paribas, who has largely stayed away from corporate financing for oil and gas developers in almost the last year, participated in a US$3 billion loan in December 2023 (4) alongside other banks including Natixis, Soci\u00e9t\u00e9 G\u00e9n\u00e9rale, and Cr\u00e9dit Agricole.<\/p>\n

The majority (57%) of\u00a0 French banks\u2019 \u00ab\u00a0low carbon\u00a0\u00bb financing\u00a0 for the 5 European companies was through corporate financing. The issue with this is that corporate financing for companies, whether in the form of loans or bond issuances, supports all of a company’s activities, including fossil fuels.<\/p>\n

Some banks acknowledge that this corporate financing is problematic. Cr\u00e9dit Agricole CEO Philippe Brassac even admitted to the Senate that they may be criticized for their contribution to companies\u2019 non-renewable, i.e. fossil, activities. But the banks, including Cr\u00e9dit Agricole, continue to justify this in the name of supporting the transition. The argument is strategic: they acknowledge the problem in order to better refute it, indicating that it is a lesser evil to accept in order to support the transition of these majors.<\/p>\n

However, our analysis reveals that, apart from Equinor, no company plans to allocate more than a third of its investments to \u00ab\u00a0low carbon\u00a0\u00bb activities in the coming years. In other words, providing untargeted financing to these companies will serve fossil fuels more than \u00ab\u00a0low carbon\u00a0\u00bb activities.<\/p>\n<\/div><\/div><\/div>

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TotalEnergies is no exception<\/h2><\/span>
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Of the US$14.8 billion that the 4 main French banks provided to TotalEnergies between 2020 and 2023, over 84.1% went to its fossil fuel activities. BNP Paribas allocated 12.7% of their total financing to TotalEnergies to \u00ab\u00a0low carbon\u00a0\u00bb activities, Cr\u00e9dit Agricole 14.9%, while BPCE allocated 17.7% and Soci\u00e9t\u00e9 G\u00e9n\u00e9rale nearly 24.7%.<\/p>\n

Most of this US$14.8 billion took the form of corporate financing. The 4 French banks\u2019 dedicated financing for \u00ab\u00a0low carbon\u00a0\u00bb activities amounted to just US$980.7 million between 2019 and 2023.<\/p>\n

Cr\u00e9dit Agricole provided US$288.7 million for \u00ab\u00a0low carbon\u00a0\u00bb activities, 16 times less than what it provided for TotalEnergies’ fossil fuel activities during the same period. However, when questioned about its financing for TotalEnergies at the Cr\u00e9dit Agricole annual general meeting in May 2023, Philippe Brassac recognized that oil and gas expansion was incompatible with the goal of limiting warming to 1.5\u00b0C, but claimed that the bank’s financing for TotalEnergies supported the group’s renewable activities. The figures demonstrate otherwise. When added to the portion of corporate financing attributable to TotalEnergies’ \u00ab\u00a0low carbon\u00a0\u00bb activities, the amounts provided by Cr\u00e9dit Agricole still only represent 14.9% of the total financing provided to the French major between 2020 and 2023. Despite their strong commercial relationships with TotalEnergies, French banks did not participate in all of the company\u2019s targeted financing calls for \u00ab\u00a0low carbon\u00a0\u00bb projects. They did not participate for example in the US$1.8 billion received by Seagreen Wind Energy, a subsidiary of TotalEnergies, in 2020.<\/p>\n<\/div><\/div><\/div>

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At the end of 2023, and with the conclusions of COP28, we made even more radical decisions, namely to concentrate our project financing solely on renewable energy or \u00ab\u00a0low carbon\u00a0\u00bb projects given the likely importance of the volumes needed in the coming years. And I emphasize because it’s somewhat controversial, I emphasize that we do not exclude any renewable energy project, including those of energy companies. We face the criticism that if you finance energy companies\u2019 renewable energy projects, you allow them in a way to develop the rest., It’s probably true but in any case, our policy, transparently, is not to reject any renewable energy financing project. And as for corporate financing for energy companies, because here too, we face another criticism that must be answered, you talk about projects but in the end, what are your criteria for non-dedicated corporate financing? Well forour corporate financing for energy companies, we decide based on their transition plan and the credibility of their transition plan.<\/i><\/p>\n<\/div>

Philippe Brassac, CEO of Cr\u00e9dit Agricole, during the hearing at the Senate on the resources mobilized and that can be mobilized by the State to ensure TotalEnergies respects France’s climate objectives. (5)<\/strong><\/p>\n<\/div><\/div><\/div>

It is worth noting that TotalEnergies is the world’s leading listed company in terms of planning the most new oil and gas fields, ahead of BP, ExxonMobil, Shell. TotalEnergies plans to allocate 66% of its net investments to fossil fuels by 2028, with 30% of its net investments dedicated to oil and gas expansion (including new oil and gas fields and new LNG terminals).<\/p>\n<\/div><\/div><\/div>

Breakdown of TotalEnergies financing per bank<\/strong><\/p>\n<\/div>

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Financing a major oil and gas company is financing oil and gas. This truth needs to be reiterated, and it has been demonstrated through Reclaim Finance’s\u00a0 new research. Contrary to their claims, the four largest French banks continue to fuel our dependence on fossil fuels and oil and gas expansion when they finance TotalEnergies and its peers. Only financing specifically directed to \u00ab\u00a0low carbon\u00a0\u00bb projects can guarantee the absence of support for fossil fuel expansion. As for corporate financing, which represents the lion’s share of financing to these companies, it must immediately cease and be formally excluded through public commitments from French banks.<\/b><\/p>\n<\/div>

See detailed data<\/span><\/a><\/div><\/div><\/div>
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Notes:<\/h3><\/span>
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  1. BP, Eni, Equinor, Repsol, and TotalEnergies. The financial institutions participating in Shell’s \u00ab\u00a0low carbon\u00a0\u00bb financing are not shown in the available data; however, Shell received just US$387 million dedicated to ‘low-carbon’ activities between 2020 and 2023.<\/li>\n
  2. The selected companies are the 6 majors, the 2 other large European integrated companies, and 4 national oil and gas companies (NOCs), which are among the largest developers of oil and gas fields according to the Global Oil and Gas Exit List<\/a><\/span>: ADNOC, BP, Chevron, Eni, Equinor, ExxonMobil, Petrobras, Repsol, QatarEnergy, Saudi Aramco, Shell, TotalEnergies.<\/li>\n
  3. Chevron, Exxonmobil, ADNOC, Petrobras, QatarEnergy, Saudi Aramco<\/li>\n
  4. According to the Bloomberg terminal, this is a US$3 billion sustainability-linked revolving loan, made on December 4, 2023. The ‘sustainable’ label is not justified since the loan will serve the group’s entire activities, and its repayment depends on the achievement of extremely minimal decarbonization objectives that do not concern the group’s scope 3 emissions, which accounted for 87% of the major’s emissions in 2023.<\/li>\n
  5. See Philippe Brassac’s hearing<\/a><\/span>, and read the transcript<\/a><\/span>.<\/li>\n
  6. Details of the methodology can be found on page 9 of the Methodology FAQ document Banking on Climate Chaos: Fossil Fuel Finance Report 2024<\/a><\/span>.<\/li>\n<\/ol>\n<\/div><\/div><\/div><\/div><\/div>
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    Methodology :<\/h3><\/span>
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    This analysis covers financing for 12 companies:<\/p>\n