140 finance firms have fled coal. Oil, gas are next — report

Source: By Avery Ellfeldt, E&E News reporter • Posted: Wednesday, October 21, 2020

Dozens of major financial firms have begun to limit their investments in the oil and gas sector — a signal that the world has started to retreat from businesses that drive climate change, according to one advocacy group.

The findings by the Institute for Energy Economics and Financial Analysis, a sustainable energy proponent, is derived from a new tool, released Monday, that tracks which financial institutions have committed to reducing their exposure to oil and gas companies.

Per the group, 50 firms, banks, insurers, pension plans and asset managers have unveiled policies that restrict them from funneling dollars into oil sands exploration and Arctic drilling.

That’s a significant figure, IEEFA argued in an accompanying analysis, given that the World Bank, BNP Paribas SA, Crédit Agricole Group and Axa SA in 2017 became the first firms to say they would limit their investments in the planet-warming sectors.

Further, 23 of those policies were adopted in 2020 alone.

It’s a pattern that mirrors previous moves by more than 140 financial institutions to cut some ties with thermal coal companies, said Tim Buckley, IEEFA’s director of energy finance studies. Among them is wealth mammoth BlackRock Inc. — which manages more than $7 trillion in assets — and Citigroup Inc., which has pledged to halve its coal credit exposure by 2025.

“[W]e are now seeing a similar accelerating shift of capital away from oil and gas exploration, starting with high risk oil sands development and drilling in the Arctic,” Buckley said in a statement. “This momentum in fossil fuel divestment globally means we expect a continuation of new announcements from other financial institutions seeking to better manage increasing climate risk.”

European institutions have led the charge, with 36 different firms initiating their exit from oil and gas since 2017.

According to IEEFA, Crédit Mutuel Asset Management and BNP Paribas, of France, and the Netherlands’ ABN AMRO have some of the most aggressive exclusion policies because they have the fewest loopholes.

The European Investment Bank was found to have the “strongest of all restrictive policies.” In November 2019, the multilateral development bank pledged to end financing for oil, fossil gas, traditional gas infrastructure, power generation technologies and large-scale heat production infrastructure by the end of 2021.

“No other financial institution is committing to end financing for all kind of unabated fossil fuels within such a short timeframe,” the IEEFA analysis said.

U.S.-based firms, meanwhile, took much longer to put in place their own policies — most of which are weaker than their European counterparts’.

In December, Goldman Sachs Group Inc., for instance, became the first major U.S. bank to announce it would not finance oil and gas drilling in the Arctic, including the Arctic National Wildlife Refuge (Greenwire, Dec. 16, 2019).

In the months since, JPMorgan Chase & Co., Citigroup Inc., Wells Fargo & Co. and Morgan Stanley have announced similar moves. To date, Bank of America Corp. has not done the same, drawing the ire of activists who say these commitments are a critical — albeit limited — first step, given that the world’s biggest banks have pumped more than $2 trillion into fossil energy companies since the 2015 adoption of the Paris Agreement.

According to IEEFA, the rise in these policies — paired with a wave of recent pledges to reach “net-zero financed emissions” by 2050 — makes a compelling case that oil and gas soon could become the “new coal.”

Jason Disterhoft, a finance campaigner with the Rainforest Action Network, agreed.

As it stands, most institutions’ current policies deal with fracking, tar sands or energy activity in the Arctic. But he said he anticipates that most firms eventually would strengthen their financing restrictions on all fossil fuels. That could include the requirement that clients decarbonize their operations on a certain timeline — or risk losing access to financing all together.

“Oil and gas definitely is going to be the new coal,” Disterhoft said. “That’s the direction of travel, it’s a one-way ratchet.”