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Bank's Break Climate Commitment Within Year

Less than a year after Europe’s biggest banks signed the United Nation’s backed Net-Zero Banking Alliance, a report shows that the likes of Barclays (BCS) -2.89% and HSBC (HSBC) -0.13% have pumped £24 billion into oil and gas companies.

Alena Vogt Feb 14, 2022

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In April of 2021, banks acknowledged their role in the transition to greener energy and the Net-Zero Banking Alliance (NZBA) commits them to set targets to reduce carbon emissions. Now a report has found that major banks have invested in drilling new oil wells and tapping into fresh gas reserves.

These investments are a direct contradiction to commitments in international agreements and will set back the switch to renewable energy sources immensely.

ShareAction, a campaign group for net-zero, have shown that 25 banks that signed the NZBA agreement have provided $33 billion (£24 billion) in loans and other financing to companies planning to expand their gas and oil sources.

Included in those companies were oil tycoons ExxonMobil (XOM) +2.52%, Saudi Aramco, Shell (SHEL) +1.27% and BP (BP) +0.51%. All of which have defied cries to cut their carbon footprint and have greatly profited from rising gas prices in recent months.

For the global markets to reach net-zero by 2050, a goal that needs to be reached to avoid global heating of more than 1.5 degrees Celsius, climate scientists and economists have warned that stopping expansion of oil and gas production is a must.

Investors are careful with gas and oil assets, as they could become damaging investments when the world shifts to stricter emissions targets. However, a report by the accountants EY showed that investors already involved in gas and oil assets are pushing firms to hold off any drastic changes. 70% of UK companies have admitted to a resistance from shareholders and investors and 42% said shareholders want them to wait for the competition to shift first.

ShareAction’s senior research manager, Xavier Lerin, spoke out:

“If oil and gas demand decrease in line with 1.5C scenarios, prices would fall and assets become stranded. On the other hand, if demand did not fall enough to limit global warming to 1.5C, the economy would suffer from severe physical climate impacts. Either way, value will be destroyed for energy companies, banks and their investors.” (The Guardian, 2022).

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*Stock prices taken on 14.02.2022 at 10:57am.

*Jolly, Jasper (14. February 2022). The Guardian: Europe’s biggest banks provide £24bn to oil and gas firms despite net zero pledges. Last viewed on 14.02.2022 on https://www.theguardian.com/business/2022/feb/14/europes-biggest-banks-provide-24bn-to-oil-and-gas-firms-despite-net-zero-pledges.

Alena Vogt

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