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Global banks pledged to cut emissions – but still invest billions on US gas exports

April 5, 2023

The Guardian
Taylor Kate Brown
Original Article

Many banks promised to work toward net-zero emissions – but their targets explicitly exempt liquefied natural gas projects

America’s massive gas export boom is about to get bigger. By the end of the decade, the Gulf coast could see as many as 12 new liquefied natural gas terminals (LNG) built along its shores.

This expansion would triple the amount of gas the US currently exports to be burned around the world, adding more than 200 coal plants worth of greenhouse gas emissions each year, according to one estimate.

The terminals can’t move forward without money from the megabanks that bankrolled the first boom less than a decade ago. Almost all of these same banks have pledged to work toward a world with net-zero emissions. But for many, their climate targets explicitly exempt LNG projects.

Banks have argued LNG exports help reduce climate pollution by replacing coal with gas but critics say the full emissions of the exports, including producing and moving that fuel around the world, make that calculus questionable. “Fossil fuel expansion is fundamentally incompatible with meeting that net-zero goal,” says Adele Shraiman, a campaign representative with Sierra Club’s Fossil-Free Finance project.

In March, the Intergovernmental Panel on Climate Change warned any new fossil fuel development is likely to push the earth’s climate past an increasingly dangerous 2 degrees of warming. Both environmental groups and major investors have said banks are not using their financial power fast enough to cut carbon pollution and invest in zero-emissions energy.

About 20 banks have financed the majority of the construction costs for LNG along the US Gulf coast. By the end of 2022, those financial institutions had provided loans or bond underwriting, combined, of more than $110bn, according to data compiled by the Sierra Club. An additional $14bn has been financed this year.

About a quarter of the $110bn came from three financial institutions: SMBC, Mizuho and MUFG – Japan’s megabanks, which supported the building of export terminals including Sabine Pass, Corpus Christi and Plaquemines. Japan’s need for LNG in the wake of the Fukushima nuclear disaster led to those investments, and while they have pledged to cut carbon emissions, they have made no promises around LNG.

Our of the six largest US banks – Morgan Stanley, JP Morgan Chase, Goldman Sachs and Bank of America – have backed export terminal construction in the region with almost $22bn in loans and underwriting.

The top banks backing LNG projects in the US either declined to comment to Floodlight or did not answer written questions.

Shraiman, of the Sierra Club, said US banks are trailing other global financial institutions, especially European banks, in both their pledges to reduce emissions and in actually cutting fossil fuel financing.

Of the six major US banks, only Wells Fargo and Citibank, the only two major US banks not as heavily invested in LNG, have absolute emissions targets for 2030 for the oil and gas sector – publicly committing to a reduction of 26% and 29% percent respectively from 2019 levels.

Others have only committed to lowering the average intensity of the emissions across all the projects they finance. This would potentially allow the total amount of greenhouse gasses they finance to grow, including increasing investments in gas that are less polluting than oil and coal, but expand their total carbon footprint.

Europe’s scramble for gas after the Russian invasion of Ukraine reinvigorated interest in US LNG. Yet, any new projects wouldn’t come online until mid-2025 at the earliest. To stave off uncertainty for future demand for the fuel, US developers have sought to lock buyers into contracts as long as 20 years.

Those long-term contracts entice banks to finance LNG, even as they argue that such investments are helping reduce the world’s carbon emissions.

“I think a lot more work needs to be done on getting folks to understand the [climate] risks associated with LNG,” Shraiman says, adding there’s a “pervasive view” in the finance industry that exporting gas will help displace coal more than renewables, and the need for gas will continue for decades. It’s a view shared by the CEO of America’s largest bank.

Shraiman says bank policies on LNG are among the gaps in their net-zero promises.

Take, for example, JPMorgan Chase. One of the largest investors in fossil fuel projects worldwide, the bank’s 2030 target aims to reduce the average intensity of carbon emissions of the oil and gas projects it finances. But the bank doesn’t detail how it will reach those targets.

JPMorgan Chase isn’t alone. Most major banks don’t include loans to Gulf coast LNG projects in their emissions pledges.

Excluding LNG and other businesses from those calculations ignores methane emissions and leaks from transporting, processing and shipping the fuel. Smaller but persistent methane leaks across US infrastructure are likely underreported and can mean the difference between exports actually creating more emissions than coal.

Roishetta Sibley Ozane, Gulf fossil finance coordinator for the Texas Campaign for the Environment, says LNG projects promise local economic benefits, but nearby Black and low-income communities such in Lake Charles in south-west Louisiana see only the impacts of a warmer world.

“The people in those communities aren’t the ones that are being hired,” she says, adding that it’s a “bad look” for the American banks that say they want to invest in these communities to fund industries that harm them.

She’s worried, among other things, about air pollution and increased coastal erosion, especially given the destruction storm surges from Hurricane Laura brought to the area. One proposed project is within the debris line from that storm.

European banks are the most vocal about LNG financing and have more aggressive 2030 targets – as much as a 34% reduction in absolute carbon emissions. But there are key exceptions.

HSBC announced in late 2022 it will no longer finance new oil and gas fields, a first among banks of its size. But the British bank will continue to finance and advise other fossil fuel projects, including shale gas development and gas-fired power plants under certain conditions. The bank did not respond to questions about their position on LNG.

In late March, French bank Société Générale said it had backed out of Rio Grande LNG. While the bank previously said it would no longer invest in new or significant LNG expansions in North America, it excluded “already mandated” projects, leaving its continuing support for the project unclear until recently. Société Générale did not respond to questions about its relationship with Driftwood LNG, another major project.

Public pressure has sometimes made a difference. In 2017, a group of local Indigenous activists and Sierra Club representatives from Texas’s Rio Grande Valley traveled to Paris to lobby BNP Paribas, then the financial adviser to a proposed project near Brownsville. Months later, BNP backed out of the project. It has not financed an LNG terminal in the US since 2017.

Frustrated by permissive state and federal agencies, Sibley Ozane and others have turned their activism toward the American banks funding the many existing and proposed projects in Louisiana and Texas.

“You can get all the permits that you want,” she says. “But if you don’t have the funding, you can’t get anywhere.”

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