Finance

Can finance still support oil and gas? A unique assessment tool

The tool assesses and scores the oil and gas exclusion policies of the 150 largest global financial institutions (60 banks, 30 insurers and 60 investors) (3). A financial institution is well rated in the tool provided it meets three key indicators: it ends its support for any new oil or gas project; its support for companies developing new oil and gas projects; finally, it adopts an exit plan from oil and gas (4).

Currently, less than half of these 150 institutions have oil and gas exclusion policies in place (6), while many are committed to aligning their portfolios and activities with a 1, 5°C by joining the Glasgow Financial Alliance for Net Zero (GFANZ) (7).

According to Clément Faul, Financial Player Policy Analyst at Reclaim Finance, “By combing through the policies of financial actors, the tool very clearly reveals the gulf that still separates them from international climate objectives and very often from their own promises in this area. By detecting greenwashing practices while rewarding good practices, we hope it pushes the entire finance sector to do better. More than half of the heavyweights in the sector have still not adopted a policy to restrict their support for oil and gas. And when they exist, the policies are not robust enough to actually reduce the financial flows that fuel fossil fuels and their development. To say that there is currently a lot of room for improvement is an understatement. »

Oil and gas expansion, a blind spot for financial players

The Oil and Gas Policy Tracker (OGPT) also points out the main weaknesses of existing policies. With a few exceptions, financial players ignore and take no action against oil and gas expansion, an essential prerequisite for aligning with a 1.5°C warming trajectory (8).

  • Only 9 financial institutions exclude any support for any new oil and gas production project. The others are limited to certain types of projects (oil sands, drilling in the Arctic or ultra-deep offshore, or shale oil and gas).
  • Only 5 financial institutions restrict support to companies developing new oil and gas projects. The others limit their direct support to projects but continue to finance the companies that develop them.
  • Of the 12 French financial players assessed in the OGPT (9), only two have taken measures against oil and gas expansion: the Banque Postale, and to a lesser extent, Crédit Mutuel (10).

For Maxence Delaporte, oil and gas campaign manager “The French financial center is one of the best pupils… of a class of dunces. As usual, the French took up the subject of “oil and gas” long before the others. But contrary to what they were able to do for coal, they continue to ignore major issues here such as oil and gas expansion. Yet it is THE climate priority, an obvious prerequisite for alignment with 1.5°C. If they are serious about becoming the most climate-smart financial center in the world and setting the pace, it is imperative that they stop ignoring the impact of their financial services on the climate and refuse to support companies that do not give up on their oil and gas development projects.”

Variable geometry policies and exception regimes

The OGPT reveals policies with variable geometry and with worrying exception regimes. For example :

  • While 66 financial players have adopted exclusion measures on one or more unconventional oil and gas sectors, only 14 financial institutions (including Crédit Mutuel, La Banque Postale and AXA (11)) have made commitments on fossil fuels conventional which nevertheless represent 50% of the sector’s expansion plans.
  • More and more policies make exceptions for companies with “credible transition plans” or “aligned with 1.5°C”, without ever associating these concepts with red lines on the carbon budget or the expansion of oil and gas. gas. This is for example the case of AXA in its oil and gas policy, adopted in October 2021 (12).
  • Almost all oil and gas policies restrict support for oil and gas in the Arctic (54 out of 66). But the geographical scope of application is often too limited. Only 8 actors, including 5 French actors (13), have adopted the definition of the Arctic used by AMAP, the Arctic Council working group responsible for monitoring pollution and climate change.

Reclaim Finance plans to gradually expand the scope of the Oil and Gas Policy Tracker to include 200 additional international financial institutions. Between now and the UN General Assembly in September, the Oil and Gas Policy Tracker, like the Coal Policy Tool (14), will assess the oil and gas policies of all significant members of the Glasgow Financial Alliance for Net Zero (GFANZ).

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