A bank that has pledged to cut funding for Arctic oil drilling. Anyway, the money went away.

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These promises sparked conflict among investors, environmentalists and banks. Some investors and environmentalists say it has flaws, with big banks continuing to flow money from big banks to companies operating in the oil and gas-rich regions of Norway, Russia, Canada and Alaska. Under pressure, two banks, BNP and HSBC, say they are reviewing their promises to strengthen them.

Controversy over the funding of Arctic oil and gas drilling comes as world leaders and major financial firms prepare to meet in Glasgow, Scotland, for the UN climate conference on carbon emissions control. Happens to An important theme of the conference is what governments and businesses promise, and how meaningful they are in terms of real-world consequences.

Mark Carney, former head of the Bank of England and UN special envoy for climate change and finance, urged the Bank to sign a comprehensive “net zero” pledge to end carbon debt by 2050. Investors have said that these pledges have not reached the necessary action.

“This policy is not unquestionable,” said Federikovin, a senior cross-asset analyst at Fidelity International on the Arctic promise. The asset manager manages a total of $4.2 trillion and is one of 115 investment companies that recently wrote to a bank manager seeking further action to phase out fossil fuel financing. Down.

Among complaints about the pledge are oil and gas companies operating at the corporate level in the Arctic where the funds are substitutable, while banks direct Arctic projects to what is called a project finance loan. continues to lend.

Over the past decade, melting Arctic ice has opened up previously inaccessible areas for oil and gas exploration. Arctic oil investments will increase by 19% per day to 1370 per day by 2026, according to an analysis of Rystad Energy data by Reclaim Finance, a Paris-based environmental group that tracks Arctic oil and gas mining. It is set to be equivalent to 10,000 barrels of oil.

Environmentalists and investors were concerned that opening up a new part of the world to drilling would hinder investment efforts in renewable energy.

Yamal LNG plant in Arctic Russia invested by TotalEnergies.

Photo:
Smirnov Vladimir / Zumapress

Banks, including France’s BNP, launched their Arctic commitments in 2017. However, since then, BNP has helped provide corporate loans to companies operating in the Arctic Circle. It was part of a group of banks that arranged loans of $6.35 billion to Total Energies SE in 2020...

TTE 1.26%

TotalEnergies is an investor in Arctic LNG2, a liquefied natural gas developer in northern Russia. A TotalEnergies spokesperson declined to comment.

When President Donald Trump sought approval for oil development in Alaska’s Arctic National Wildlife Sanctuary, more banks became involved in the controversy and exacerbated the problem.

In late 2019, Goldman Sachs was one of the first US lenders to say it would not directly fund Arctic oil exploration.

There is no indication that banks have violated their commitments focused on project finance or lending to specific projects. However, according to the International Energy Agency, about 90% of energy investments are primarily funded from corporate balance sheets.

ConocoPhillips,

COP 0.39%

According to a spokesperson for the company, it is Alaska’s largest oil producer and does not depend on project finance in the Arctic Circle. However, it receives corporate loans from several banks that have made Arctic drilling promises. Earlier this year, for example, Goldman was part of a banking conglomerate that helped ConocoPhillips borrow more than $3 billion. A Goldman spokesperson declined to comment.

A spokesperson for ConocoPhillips said in Alaska that the company has “shown an ongoing commitment to responsibly develop the state’s resources for more than 50 years.”

Another issue: Unlike banks, environmentalists, and some investors, the Arctic Circle often has a short geographic definition.

“Investors want a broader definition of the Arctic Circle,” said Pittsburgh-based fund manager Federated Hermes Inc. Roland Bosch, an executive at the EOS unit, advises companies to improve their environmental policies. In 2020, the Herms EOS unit upheld a shareholder resolution in Barclays BCS. 2.31%

PLC asked banks to end their fossil fuel lending.

BNP Paribas is reviewing the definition of the Arctic Circle, which excludes direct funding of projects.

Photo:
Theo Jacometti/Bloomberg News

The BNP excludes projects in the largest 12 months of ice-covered offshore areas and in the Arctic National Wildlife Sanctuary. A BNP spokesperson confirmed that they had financed a company operating in a wider area of ​​the Arctic Circle, but said it respected efforts to directly finance projects in excluded areas. ..

“The group is currently working on a review of funding standards in the Arctic,” said a spokesman. “Work in progress includes a detailed analysis of all existing definitions in the Arctic Circle.”

Robert Fardak, chief investment officer of environmental, social and corporate governance for the London-based hedge fund: Man Group EMG 0.75%

PLC. Mann took the carbon issue to the company and was one of the shareholders of HSBC, which supported a proposal for banks to phase out coal financing.

In April 2018, HSBC pledged to waive project finance for a new offshore oil and gas project in the Arctic, which has narrower sea ice than other banks. Since then, we have helped arrange corporate financing for companies with arctic projects. Royal Dutch Shell RDS.A . including 1.29%

According to Reclaim Finance, plc, Total Energies, Wintershall DEA AG in Germany.

“We are in the process of reviewing and updating our policies in the Arctic Circle,” an HSBC spokesperson said.

Known in the investment industry as ESG, a commitment to arctic drilling issues for investors who increasingly judge companies based on their commitment to environmental, social and governance issues.

“It would be very disappointing if a bank with a high ESG score was involved in drilling in the Arctic,” Win of Fidelity said.

write in Simon Clark ([email protected])

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A bank that has pledged to cut funding for Arctic oil drilling. Anyway, the money went away.

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