Governments must back banks' efforts to end dirty financing

Pledges by leading banks to pull back from financing “dirty” projects such as coal will be meaningless unless governments step in with regulations to prevent other investors taking their place, a senior banker has said.

  • By Owen Sanderson
  • 11 Oct 2018
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Two weeks ago, Standard Chartered pledged to no longer finance new coal power projects, a commitment that has been made by 17 other major banks, according to the BankTrack project, an environmental pressure group that monitors loan commitments to polluting projects. 

But according to BankTrack, almost all the banks stepping out of coal are European-headquartered. US-based PNC and US Bank and South African Nedbank are the only exceptions.

Standard Chartered did not pull financing for the 14 projects in the pipeline when it made the announcement, although CEO Bill Winters said: “More than 1.1bn people still do not have access to reliable power but recent developments in technology mean that alternative sources are increasingly available to meet that need without the impact of coal-fired power on the environment.”

Olivier Osty, head of global markets at BNP Paribas, said it was up to governments to stop banks financing dirty polluting projects. “I don’t see who else can do it,” he told GlobalMarkets, the sister publication of GlobalCapital. “As banks we can only do what we’re able to do, and until governments step in, there will always be someone else ready to step in. I’d like to think that because we’ve stepped away, the cost of financing so-called dirty projects has increased, but it’s hard to see that in [bond] spreads.”

BNP Paribas dropped thermal coal three years ago, and since then has pledged to finance no more new coal power plants. It has also committed to dropping “unconventional fossil fuels” — Arctic oil exploration, shale extraction, tar sands and related infrastructure such as pipelines.

This decision cost a lot of money — but without government action to stop other banks stepping in, it will have little effect, Osty said. “On sustainability, our CEO sets the tone in terms of what the bank is willing to finance, and we’ve taken pretty bold steps,” he said.

“Coming out of shale oil and gas means dropping a business where banks are very much present. The important thing is to stick to the goal of sustainable finance and not destroy the planet.”

The World Bank and International Finance Corp have been slower to commit to culling coal than European private sector banks. The US Treasury guidelines for multilateral development banks introduced under the Trump administration say that the US vote should “help countries access and use fossil fuels more cleanly and efficiently”.

The IFC is mainly exposed indirectly, through its support for financial institutions in emerging markets.

  • By Owen Sanderson
  • 11 Oct 2018

Global Green Bonds

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 HSBC 4,644.41 36 6.31%
2 Credit Agricole CIB 4,624.79 26 6.28%
3 Bank of America Merrill Lynch 4,359.57 22 5.92%
4 BNP Paribas 3,538.35 20 4.81%
5 Citi 3,486.70 19 4.74%