Europe’s five biggest banks face $1trn investor anger for fossil fuel financing

Institutional investors are urging them to stop directly financing new oil and gas fields in 2023

Five of Europe’s biggest banks are under renewed pressure to stop financing the fossil fuel industry in a campaign brought by investors with $1.5trn under their control.

Barclays, BNP Paribas, Crédit Agricole, Deutsche Bank and Societe Generale are facing intense criticism for their fossil fuel investments.

These banks were the largest European financiers of top oil and gas expanders after HSBC over the period 2016 to 2021, according to research published by campaign group ShareAction.

Now they have each been sent letters from a group of institutional investors urging them to stop directly financing new oil and gas fields by the end of this year.

The letters have been written by a group of 30 investors, coordinated by ShareAction, that include Candriam, La Française Asset Management, and Brunel Pension Partnership.

The renewed investor pressure on Europe’s banks comes as NatWest yesterday (9 February) announced it would stop reserve-based lending for new clients financing oil and gas exploration and extraction, though the bank will continue to provide this type of finance to existing clients for the next three years.

Banks net-zero pledges

In the letter the investors express concern new oil and gas fields may jeopardise the global path to net zero, and fly in the face of the banks’ own net-zero targets.

A similar investor campaign against HSBC saw Europe’s largest bank, and its largest financier of top oil and gas expanders, announce in December it will no longer directly finance new oil and  gas fields, following months of continued pressure from shareholder activists co-ordinated by  ShareAction

In their latest letter, the investors warned Barclays, BNP Paribas, Crédit Agricole, Deutsche Bank and Societe Generale their activities were also holding back the renewable energy revolution in Europe.

They said this was more important than ever as the continent battles with uncertain energy supplies in the wake of Russia’s invasion of Ukraine.  

Jeanne Martin, head of the banking programme at ShareAction, said: “These investor-backed letters  should be a wakeup call to banks that have made net-zero commitments. They must stop directly financing new oil and gas fields.”

Banks must also urgently turn their attention to companies enabling new oil and gas fields from being discovered and developed, she added.

The letters say direct financing is only the tip of  the iceberg. Asset financing for new oil and gas represents only 8% of  total financing to top oil and gas expanders. 

The investors want the banks to turn their attention to the companies behind these new oil and gas fields.  

Martin said: “Investors are putting these banks on notice that they will face ever increasing pressure if they don’t  act soon to reverse their financing of new oil and gas.”

Bank action ‘timid’

ShareAction’s latest survey of European banks’ climate and biodiversity practices shows that only timid action has been taken by European banks to cease new oil and gas activities at the corporate  level. 

The survey found three European banks have introduced corporate finance restrictions to oil and gas expansion, and four banks require transition plans from their oil and gas clients by a set date. 

Sophie Deleuze, lead ESG analyst for engagement and vote at Candriam, said: “HSBC’s decision to stop  financing new oil and gas fields is a direct result of strong, collaborative engagement from investors.  

“We welcome this decision and reaffirm our ambition to make this the new minimum standard. We look forward to further positive outcomes from our discussions with other European banks that still  finance new oil and gas projects.”  

Anders Schelde, CIO of AkademikerPension, said: “Stopping direct financing of new oil and gas fields  in breach of IEA recommendations is an absolute minimum to expect from banks that proclaim to  have a green profile. 

“We’re running out of time to avert the worst consequences of climate disaster,  and the banking sector is still struggling to implement the bare minimum. This is unacceptable in  2023.” 

Karin Nemec, CEO of Grünfin Group, said: “Europe learned a hard lesson last year. Obtaining our  energy from clean sources is critical for both protecting the environment and national security. Banks  must act now.”