Green Lending Surpasses Fossil Fuels as ‘Big Oil’ Gets Money Elsewhere → BusinessMirror

For the first time in the debt markets, more money was raised for green projects than for fossil fuel companies.

About $580 billion has been committed to renewable energy and other environmentally responsible businesses in 2022, while the oil, gas and coal industries have turned to lenders and underwriters for about $530 billion, according to data compiled by Bloomberg. But it’s not that green finance is finally beating fossil fuel lending. Rather, big oil seems to be getting more money from other sources. High oil prices over the past year have likely freed energy companies from their reliance on capital markets, said April Merlo, head of research at the environmental nonprofit Rainforest Action Network.

“We are also seeing fossil fuel companies turn to less traditional sources of capital, such as private equity, which is much harder for us to track,” Merlo said. Against this background, “it is difficult to say with certainty that a new trend will emerge in the lending markets that will last until 2023.”

The big question for oil, gas and coal companies is how they plan to use their balance sheets to transition to clean energy, Merlo said. Many now say they plan to scale up fossil fuel production now and decarbonize later, she said, she said.

“This is false logic and is not what the International Energy Agency (IEA) recommends,” she said. As for the banks, “they know what to do, but we don’t see evidence yet that they are actually ready to meet their emissions reduction targets.”

Climate ambition

These days, BANKERS make much more money from the sale of green bonds and loans. They generated about $3.3 billion in fees from these deals in 2022, according to Bloomberg, more than the $2.5 billion they received from issuing bonds and loans for the most polluting energy sectors.

Credit Agricole SA, BNP Paribas SA and Bank of America Corp. ranked #1 among green bond and loan arrangers last year, according to Bloomberg data, while RBC Capital Markets, Wells Fargo & Co. and JPMorgan Chase & Co. have been leading suppliers to the fossil fuel industry.

However, when looking at the big picture, Wall Street and its brethren clearly remain committed to funding the companies most responsible for global warming. Since the Paris Climate Agreement was announced in 2015, banks have raised almost $4.6 trillion for oil, gas and coal companies — double the $2.3 trillion it received from green loans and the sale of bonds.

But these big oil banks, including JPMorgan, say they have climate ambitions and are expanding.

Last month, a New York bank announced new emission reduction targets for airlines, cement producers, iron ore and steel companies. This adds to JPMorgan’s first set of targets, which were focused on the oil and gas, electric power and automotive sectors.

mixed reaction

JPMorgan said the six sectors currently covered by its emission reduction targets account for the majority of global emissions. The new targets should be in line with the IEA’s net zero scenario by 2050, the bank said.

Climate activists reacted ambiguously to JPMorgan’s statements.

While the adoption of additional industry targets is “great to see,” JPMorgan’s oil and gas commitments so far “haven’t changed anything about its unwavering support” for the fossil fuel industry, said Lucy Pinson, director of environmental nonprofit Reclaim Finance. “Jurors are still unaware of the material impact of these new targets on cement and steel.”

Merlot and others also questioned JPMorgan’s decision to focus on reducing the carbon intensity of its funding portfolio rather than a promise to cut absolute emissions. This echoes the opinion of a panel of experts appointed by the United Nations, which said that companies and financial institutions should focus on reducing absolute emissions while setting zero emission targets.

In response, JPMorgan said intensity-based metrics are the most “decision-supporting way to measure client progress against climate scenarios.” Bloomberg News