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Big Banks, Insurers Fail to Back Net-Zero Promises with Oil and Gas Restrictions

Although many of the world’s biggest financial institutions have been vocal about their climate commitments, fewer than half of them have introduced policies to restrict new oil and gas investments or phase out existing ones, according to a first-of-its-kind analysis released earlier this week by Reclaim Finance and more than a dozen advocacy groups.

The Oil and Gas Policy Tracker reviewed the governance policies of 60 banks, 60 investment institutions, and 30 insurers, including 74 members of the Glasgow Financial Alliance for Net Zero (GFANZ) announced with great fanfare at last year’s COP 26 climate summit. “More than half of the companies—including 20 of the GFANZ members—have no policies governing their oil and gas business,” BNN Bloomberg reports. “Just five companies, all banks, have quit or limited financing oil and gas expansion, according to the research,” and only 14 restrict both conventional and unconventional fossil fuels, Paris-based Reclaim Finance says.

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The most popular restrictions on fossil activities are bans on “several kinds of unconventional oil,” Bloomberg says, including Arctic oil and gas and tar sands/oil sands production. But 46 of the 54 provisions on Arctic drilling fall short of guidelines set by the Arctic Council, a high-level intergovernmental forum for circumpolar countries and Indigenous peoples.

“The Oil and Gas Policy Tracker is a tool to detect greenwashing practices in the finance sector,” said Reclaim Finance Director Lucie Pinson. “It confirms that despite their net-zero pledges, many GFANZ members don’t even have an oil and gas policy”—and with the “glowing exception” of France’s La Banque Postale, “those that do have a policy can still support the development of new oil and gas plans.”

Which means that, “despite their climate pledges, they are failing the most basic test for any institution aiming to align their portfolio with 1.5°C,” Pinson added. “And as Putin’s war on Ukraine reveals, they also make the world more unstable while bankrolling future conflicts.”

The release contrasted the financial institutions’ performance with the International Energy Agency’s May, 2021 call to end development of all new oil and gas development. Nearly a year later, “the industry remains on its ruthless expansion course,” said Nils Bartsch, head of global oil and gas exit list research at Sassenberg, Germany-based Urgewald, with more than 96% of them still developing new fossil assets or exploring for new reserves.

The report appeared just a week after Bloomberg green finance analyst Tim Quinson warned that rampant greenwashing is quickly making the whole concept of environmental, social and governance (ESG) investing moot.

“The concept behind ESG keeps getting harder to defend,” he wrote. “For years now, managers of big funds touting their supposed focus on the environment, social issues, and corporate governance have been faulted for holding shares of fossil fuel purveyors (including ExxonMobil Corporation and Chevron Corporation), weapons manufacturers (like Raytheon Technologies Corporation), and mining companies (such as Newmont Corporation).”

The criticisms of a “feckless” ESG industry “have only grown louder since Vladimir Putin launched his war against Ukraine,” he added. “Since then, it emerged that so-called ESG funds had at least $8.3 billion allocated to Russian government bonds and companies. While the figure is small compared with the roughly $2.7 trillion devoted to ESG-related funds, the revelation has turbocharged skepticism about the merits of ESG investing.”

Former Ukrainian finance minister Natalie Jaresko declared the war a “moment of truth” for ESG, in a March 3 column for the Financial Times. “All too frequently, corporations and their executives engage in marketing or obfuscation of what they’re actually doing—what could more accurately be called ‘ESG-washing,’” she wrote. “Will this prove to be another case of looking the other way?”

Meanwhile, Globe and Mail reporter Jeffrey Jones said Canadian banks are starting to grapple with “financed emissions”, the carbon pollution they trigger with their investment choices.

“These are by far the largest sources of greenhouse gases stemming from the business of the financial institutions,” Jones wrote. “They are the hardest to tally and out of their direct control. But these ‘financed emissions’ must be dealt with if the banks have any hope of achieving their commitments to get to net-zero emissions by 2050.”