HSBC also helped on refinery deal that will boost Amazon oil production
The Pastaza River complex, the largest wetland in the Peruvian Amazon, is a hub of biodiversity. It is home to nearly 300 species of fish and rare birds, and a source of food for the numerous Indigenous communities that live there. Its freshwater tributaries, lakes and palm swamps offer a vital buffer against climate change and its international importance is recognised by Ramsar, the UN convention on wetlands conservation.
Slicing through this land is the Norperuano pipeline, a huge 1,100km structure owned by the national oil company PetroPerú. The pipeline has been the source of more than 53 oil leaks since 2013. PetroPerú spent more than $80m on cleaning up spills related to it between 2017 and 2020.
In December, PetroPerú hailed the completion of a $5bn, 10-year project revamping its Talara refinery on the country’s Pacific coast. This new-look facility will be the destination for huge amounts of oil being carried by the Norperuano pipeline across the country from the rainforest, where PetroPerú is set to drill at two controversial new sites. And working behind the scenes to aid the financing of this project have been major international banks that claim to hold strict green policies.
In 2021, Santander helped coordinate a bond that raised $1bn for PetroPerú, which sought funds to upgrade its Talara refinery and expand its capacity to process oil from the Amazon. Two years previously, it had ruled out providing finance or services for “projects or activities in recognised Ramsar sites”. HSBC, which has a similar policy restricting finance that affects wetlands, also worked on the deal.
The money raised by the bond was to be spent on the Talara upgrade, which PetroPerú says helped the facility “produce cleaner fuels” and expanded its processing capacity by nearly 50%, to 95,000 barrels of oil per day.
Much of that oil is likely to be transported through the Norperuano pipeline from the Peruvian Amazon, where PetroPerú has extraction contracts for two drilling sites, one of which also overlaps with the Pastaza wetlands.
“There can be no financing for a company that needs to expand oil production in areas as sensitive as Ramsar sites,” said Leila Salazar-López, executive director of Amazon Watch. She added that it was “difficult to understand” how a company that has demonstrated an inability to stop spills and repair its damage “can gain the confidence of ‘climate-responsible’ investors”.
Santander told TBIJ it did not comment on clients or transactions but said it “operates strict policies that govern our financing. This includes our social, environmental and climate change risk management policy, which governs our criteria to lend to sectors such as energy, mining, metals, and soft commodities.”
HSBC said: “We are committed to supporting a just transition in developing markets and are, therefore, engaging with clients on their transition plans and operating models. Our work with clients is in line with our policies which include specific standards for environmental and human rights considerations.”
Almost 100 universities that have pledged to shed ties to the fossil fuel industry still bank with financial institutions that have collectively provided $419 billion (£345 billion) to polluting interests between 2016 and 2022.
The new research, conducted by campaign group Make My Money Matter and obtained using Freedom of Information requests, shows that 95 universities still hold a bank account with one of five leading global fossil fuel funders: Barclays, HSBC, Santander, NatWest, and Lloyds.
These banks have supplied billions in financing to Shell and BP, which this year scaled back their climate targets, as well as to other oil and gas firms such as ExxonMobil and TotalEnergies. Barclays was the bank of choice, used by nearly three quarters (73 percent) of the universities.
Barclays was the largest European financier of fossil fuels between the signing of the Paris Agreement in 2016, which set a goal of limiting global warming to 1.5C, and 2022. The British bank propped up the oil and industry with $190.5 billion (£157 billion) in funding during this time, according to the annual Banking on Climate Chaos report from the climate campaign group Rainforest Action Network (RAN).
This story comes after DeSmog revealed earlier this month that UK universities have accepted £40.4 million in funding from fossil fuel companies since 2022. Students across Europe have protested at schools and universities since returning for the new academic year. In the UK, activists from Just Stop Oil have renewed their campaigning on campuses, targeting University College London, Birmingham, Sussex, Falmouth, and Exeter.
Over 100 universities across the UK, representing 65 percent of the higher education sector, have pledged to divest from the fossil fuel industry since 2014. Over 50 are yet to make any public commitments.
Make My Money Matter says that it will be writing to universities and calling on them to ensure that their divestment commitments are not being undone by their banking choices.
“Divesting from fossil fuels while banking with Barclays is hypocritical and performative,” said Jo Campling, welfare and sustainability officer at Sheffield University Students’ Union. “Universities claim they are striving for a better future by educating their students yet they continue to provide legitimacy to the financial institutions ignoring universities’ own scientists and driving us ever closer to irreversible climate breakdown.”
‘More Needs to be Done’
The universities that have held accounts with Barclays include Bristol, one of the “greenest universities in the UK”, University College London (UCL), the UK’s largest higher education institution by student population, and the University of Glasgow, the first UK university to commit to fossil fuel divestment.
Researchers analysed the period between April 2021 and April 2023. The threshold for a ‘banking relationship’ includes a current or deposit account held within the period, but excludes other services such as loans, credit facilities, or currency exchanges.
In 2022, Barclays was a major backer of unconventional oil projects, such as Arctic extraction and extraction from tar sands. The latter emits up to three times more global warming pollution than producing the same quantity of crude oil.
As of late 2022, following pressure from investors, Barclays has agreed to scale down its financing of oil sands operations. However, the new research shows both Barclays and HSBC remained among the top 10 (seven and eight respectively) global financiers of new fossil fuel expansion projects.
Barclays is facing heavy criticism for its ongoing role in facilitating climate breakdown, and its annual general meeting in May was disrupted by climate activists from Extinction Rebellion.
A spokesperson for Barclays told DeSmog: “Aligned to our ambition to be a net zero bank by 2050, we believe we can make the greatest difference by working with our clients as they transition to a low-carbon business model, reducing their carbon-intensive activity whilst scaling low-carbon technologies, infrastructure and capacity.
“We have set 2030 targets to reduce the emissions we finance in five high-emitting sectors, including the energy sector, where we have achieved a 32 percent reduction since 2020. In addition, to scale the needed technologies and infrastructure, we have provided £99 billion of green finance since 2018, and have a target to facilitate $1 trillion in sustainable and transition financing between 2023 and 2030.”
Peter Vermeulen, chief financial officer at the University of Bristol told DeSmog that the university takes its “climate commitments seriously” and engages with major suppliers, including banks, “to see where positive improvements and changes can be made”.
Vermeulen added that, “I, like many others, am disappointed in Barclays’s climate performance, and that they only put a serious climate plan in place in 2020. In my previous role I actively engaged with Barclays on their lack of progress in this area and witnessed improvement. More needs to be done and for that reason, since joining the University of Bristol this summer, I will step that up even further, with university, staff, and student representatives involved in this.”
Rainforest Action Network has calculated that the world’s biggest banks poured $673 billion (£554 million) into fossil fuels in 2022, while DeSmog revealed in May that four in five bank directors at the six largest banks in the U.S. have ties to polluting companies and organisations, including major fossil fuel firms.
Commenting on the findings of the Make My Money Matter report, Nat Gorodnitski from Students Organising for Sustainability said: “If we want to stop the worst effects of climate change, we need to end fossil fuel funding. Banks are the biggest funders by a long way and rely heavily on the higher education sector for recruitment, reputation, and business, while their fossil fuel financing contradicts academic research, university policies, and students’ needs.
“This gives students and universities the unique power to pressure banks to end their fossil fuel financing in a meaningful way, and call for a shift to funding sustainable energy.”
A spokesperson for HSBC said: “Supporting the transition to net zero and engaging with clients to help them diversify and decarbonise is critically important to us. We are committed to aligning our financed emissions to net zero by 2050.”
A University of Glasgow spokesperson that the university “is committed to doing our part to tackle the climate emergency. In 2014, we pledged to divest our holdings in companies involved in the oil and gas sectors over a 10 year period, and have already achieved this. We have also set an ambitious target to achieve net zero greenhouse gas emissions by 2030. Our socially responsible investment policy is regularly reviewed.”
HSBC made a secretive multimillion-dollar loan to an energy company that is bulldozing a village in western Germany to expand a huge coal mine, just three months after the bank pledged to stop funding coal.
HSBC, which claims it is “helping to lead the transition to a more sustainable world”, approved the $340m deal with energy giant RWE after internal discussions in which senior figures at the bank recommended that its involvement should not be publicised.
Violent clashes broke out at the site of the mine on Wednesday as riot police tried to drag away protesters to make way for the bulldozers under the glare of the world’s media. Hundreds of environmental activists have set up camp in Lützerath, the last of several villages to be sacrificed for the 35 km2 Garzweiler mine, which is owned by RWE, one of Europe’s largest energy companies.
According to data from Refinitiv, RWE borrowed a total of $5.4bn in loans arranged by a group of 25 banks including HSBC, Barclays and Santander. All three have committed to aligning their financing and investments with net zero by 2050.
At COP27 last year the UN secretary general, António Guterres, said that it was reprehensible to use “bogus net-zero pledges” to cover up “messy” fossil fuel expansion. “It is rank deception,” he added. “This toxic cover-up could push our world over the climate cliff. The sham must end.”
HSBC told the Bureau: “Details of this [deal] and all its participating banks are in the public domain, as is normal. We have processes to ensure our financing aligns with our policies, which include an expectation on clients to produce and implement credible transition plans.”
Barclays declined to comment on the RWE loan but said it is phasing out financing of thermal coal mining and coal-fired power generation. Santander declined to comment.
Image: Mike Langridge 2008
‘We don’t want our name associated with it’
At the end of 2021, HSBC committed to withdraw financing from clients that are expanding the production of thermal coal and phase out funding for coal-fired power and thermal coal mining.
Bankers asked internally whether lending money to RWE would comply with this policy and raised concerns about RWE’s plans to demolish several villages. The Garzweiler mine produces 25m tonnes of lignite – the dirtiest form of coal – every year.
After several meetings, the sustainability and reputational risk department approved the deal but said that RWE should not publicise HSBC’s involvement.
An HSBC banker, who asked to remain anonymous, said of the deal: “We’re saying, ‘We don’t want our name to be associated with it, but here are the funds and please don’t tell anyone that we gave you the funds.’ I acknowledge that this approach is questionable.”
The deal was initially structured as a sustainability-linked loan, meaning its terms include a commitment from RWE that it will hit certain climate targets by 2025. But the penalty it would face for failing to do so is a tiny increase in the interest it pays on the loan. This would come to $86,700 a year for a company whose most recent annual revenues were $26bn.
Sustainability-linked loans are meant to encourage polluters to transition to more environmentally friendly operations, but companies that raise funds through the loans do not face any restrictions on how that money is used.
The HSBC banker said: “There is no guarantee that the [RWE loan] won’t be used to help pay a supplier, or pay salaries of contractors involved in the coal mine project.”
Protesters near Lützerath in January 2023. Photo: Lützi lebt/Unwisemonkeys CC BY-NC 2.0.
A condemned village
The vast Garzweiler open-cast mine has already swallowed 13 villages, according to Friends of the Earth Germany. Thousands of residents have been resettled and churches, schools and village halls have all been bulldozed to satisfy the voracious demand for energy in a heavily industrialised area.
Local residents and environmental activists across Germany have campaigned to protect another six neighbouring villages that were slated for demolition and appear to have had some success. RWE recently said that it would stop using coal in 2030 and so would drop its plans to raze five of the villages.
That just leaves Lützerath, where police are battling to evict hundreds of activists who have been living in abandoned buildings and makeshift treehouses for the past two and a half years. They have built a skate hall, farmed their own food and run workshops on climate justice.
Eckardt Heukamp was Lützerath’s last remaining resident until he moved out last year. “You saw how the church was torn down and dug up, how the villages have vanished,” he told the Times. “At some point you just say to yourself that it can’t keep going on like this, being subjugated and driven into a corner all the time.”
The showdown between the authorities and occupying activists escalated on Wednesday as riot police armed with batons moved in to evacuate the area, hauling out protesters and making arrests as fires burned in the streets of the village.
Just a few hundred metres away, one of the world’s largest land vehicles continues to carve away at the earth, bringing the edge of the mine ever closer to Lützerath.
Meaningless targets
In order to secure the loan, RWE committed to reducing its carbon emissions per unit of power generated, across all its energy sources. This means that, as long as it adds enough wind and solar power into the mix, the company could in fact increase its emissions from coal – and its planet-warming emissions overall.
It also committed to increasing the proportion of energy it generates from renewables and the amount it is investing in sustainable energy.
The penalty if RWE fails to meet all three targets is an increase in the interest it pays on the loan of less than 0.03 percentage points.
“It’s almost meaningless,” said Tariq Fancy, BlackRock’s former chief investment officer for sustainable investing. “Because the only thing that really changes behaviour in financial markets is when you change incentives. And you can’t change incentives with something so miniscule.”
Critics say RWE – which is Europe’s largest emitter of CO2 – could single-handedly stop Germany meeting its climate targets. Catharina Rieve of the German Institute for Economic Research said this will be the case if the company follows through with its plan to burn 280m tonnes of coal from the Garzweiler mine before 2030.
RWE told the Bureau it disputed this projection because the EU’s emissions trading system means that “if one company emits less, other companies elsewhere can emit more”.
The company added: “In the current energy crisis, ensuring security of supply is vital. At the same time, protecting the climate remains one of the key challenges of our time. RWE supports both. The company invests billions of euros into accelerating the energy transition.”
The HSBC banker said it was questionable to view a company as transitioning to net zero while it was expanding coal extraction, and that the bank’s attempts to challenge polluters on their transition plans was minimal.
HSBC decided the loan should not be classified as “sustainability-linked” internally, even though environmental targets remained part of the agreement. The bankers agreed it should not count towards HSBC’s target to contribute up to $1tn in sustainable finance by 2030 because of RWE’s plan to expand the Garzweiler mine and demolish several villages.
Barclays and Santander declined to comment on whether they are counting their parts of the RWE loan package towards their internal sustainable finance targets.
HSBC told the Bureau: “We have been clear we will finance energy companies who are taking an active role in transitioning to a net zero energy future, and we remain committed to this goal amid the double challenge of tackling climate change and an acute energy crisis in Europe.”
RWE is not the only company expanding fossil fuel production that has borrowed money under the guise of sustainable finance. Refinitiv data shows that Chrysaor – now part of the UK North Sea’s biggest producer of fossil fuels – raised $4.5bn with a sustainability-linked loan arranged by HSBC, Barclays, Lloyds, Natwest and a number of other banks.
One of the biggest oil producers in the US, Occidental Petroleum, raised $4bn, and the world’s biggest oil services provider Schlumberger raised $912m, also with sustainability-linked loans arranged by HSBC and other banks.
Tony Burdon, chief executive at Make My Money Matter, which campaigns for greener investments, said: “HSBC took an important first step in ceasing direct finance towards fossil fuel expansion projects. But as this report so clearly shows, they haven’t gone far enough.
“By continuing to provide sizeable corporate loans to companies involved in fossil fuel expansion such as RWE, HSBC is not just damaging the environment and displacing communities, they’re undermining their own climate targets.”
Lead image: Riot police stand in front of burning barricades as activists stage a protest in Lützerath. Credit: Bernd Lauter / Getty
Reporter: Josephine Moulds Environment editor: Robert Soutar Impact producer: Grace Murray Global editor: James Ball Editor: Meirion Jones Production editors: Alex Hess and Frankie Goodway Fact checker: Andrew Wasley
This reporting is funded by The Sunrise Project. None of our funders have any influence over the Bureau’s editorial decisions or output.
