Over 60 organisations have written to Equinor’s (NYSE:EQNR) biggest bankers warning them not to fund the company’s controversial Rosebank oil field due to climate risks.
- Campaigners warned that funding the Rosebank oil field is incompatible with banks’ own climate commitments and exposing them to significant reputational, legal, financial and other risks.
- In the seven years since the Paris Agreement was adopted, the world’s 60 largest private banks financed fossil fuels with $5.5 trillion, even though these companies have been racking up profits.
- Rosebank is yet another suggestion that the UK Government has dropped the ball on climate, with action needed from other actors.
In a letter to 20 of Equinor’s financiers, including Barclays (LSE:BARC), JP Morgan (NYSE:JPM) and BNP Paribas (PAR:BNP), campaigners point out that funding the Rosebank oil field in the North Sea would be in breach of these banks’ commitment to limit warming to 1.5°C.
What are the campaigners asking?
The letter was convened by BankTrack and Uplift and signed by over 60 organisations including Action Aid, Friends of the Earth and Greenpeace. It outlines how, due to Rosebank, banks’ financial relationship with Equinor risks being incompatible with their own climate commitments and exposing banks to significant reputational, legal, financial and other risks. The campaigners called on the banks not to finance the project directly and to engage with Equinor and push the company to cease its development.
All 20 banks are members of the Net Zero Banking Alliance, which commits them to align their financing with the goals of the Paris Agreement. From 2016 to 2022, they provided at least $16 billion in financing to Equinor via lending and underwriting. Santander (LSE:BNC), Barclays, JP Morgan and BNP Paribas alone have provided over $6 billion.
What is Rosebank?
Rosebank is the largest undeveloped oil field in the North Sea, containing an estimated 500 million barrels of oil. The CO2 emissions from burning this oil would equate to more than the annual emissions of 28 low-income countries combined, as well as blow the country’s carbon budget.
Formal permission is expected imminently, after a long-running deliberation process that has seen numerous political showdowns and protests by opposition groups.
Climate scientists, the International Energy Agency and others are clear that new oil and gas fields are incompatible with the world meeting its target of limiting warming to 1.5°C. The UK Government’s own advisors on climate change warned that the expansion of fossil fuel production is not in line with its net zero ambitions.
Banks allow the continued expansion of fossil fuels
Lenders have been repeatedly called out for their financing of polluting projects that are bound to breach the Paris Agreement. Firms such as HSBC (NYSE:HSBC) and Danske Bank (COP:DANSKE) have pledged to stop financing new oil and gas fields, but many are still bankrolling the industry.
According to the Banking on Climate Chaos report published in April 2023 found that, in the seven years since the Paris Agreement was adopted, the world’s 60 largest private banks financed fossil fuels with $5.5 trillion. Even though fossil fuel companies made $4 trillion in profits in 2022, banks still provided $669 billion in financing. Remarkably, this happened while oil majors such as Exxon Mobil (NYSE: XOM) and Shell (LSE: SHEL) asked for $0 financing from lenders in 2022.
Global banks’ net zero pledges have netted nothing so far, according to the report, as 49 of the 60 banks it profiled made net zero commitments, but most are not paired with rigorous policies excluding finance for fossil fuel expansion. For example, the policies contain many loopholes that allow banks to continue financing fossil fuel clients.
Rosebank is yet another suggestion that the UK Government has dropped the ball on climate, with Rishi Sunak reportedly looking to drop a £11.6 billion climate and nature funding pledge to the detriment of developing countries. There is a convenient disconnect between what the UK needs to do to actually achieve net zero, and what Westminster claims is best for the economy.
Indeed, Energy Secretary Grant Shapps said that not providing new oil and gas licences is a “bonkers policy” after Green MP Caroline Lucas urged the Government to rule out new licences, as they “won’t deliver energy security since the oil and gas is sold at global prices on international markets”. Shapps claimed that this would increase dependency to fossil fuel imports and that the North Sea produces fewer emissions than other oil-producing regions.
Of course, if the UK focused on decarbonising the grid, it wouldn’t have to rely on fossil fuels. Because the UK Government appears to be acting against its own net zero commitments, action should come from other actors, such as the banks.