'Extreme' Fossil-Fuel Lending Fell in 2017 -- Except in Canada

(Bloomberg) -- A busy year of deal-making in Canada’s oil sands last year masked a global decline in bank financing of the fossil fuel projects environmentalists say have the worst impact on the planet, according to research by a consortium of nonprofits.

The ninth annual Fossil Fuel Finance Report Card analyzes financing of "extreme fossil fuels" such as oil sands, Arctic and ultra-deepwater oil, liquefied natural gas, coal mining and coal-fired power.

"Banks now have policies in place that restrict their financing to extreme fossil fuels in a way that was unimaginable definitely nine and even five years go," said Jason Disterhoft, senior campaigner for finance issues at Rainforest Action Network, one of the six groups behind the report that was released Wednesday.

Oil sands dominate the 2017 survey because of major oil companies selling $23 billion in reserves in response to a glut of production and shortage of pipeline capacity. With that data removed, overall lending and finance drops 16 percent for 2017, to $69 billion, according to the report.

With those deals included, the global total increased 11 percent, to $116 billion.

Among the oil sands deals was Canadian Natural Resources Ltd. spending $9 billion to buy assets from Royal Dutch Shell Plc and Marathon Oil Corp. Cenovus Energy Inc. doubled its reserves and production by buying ConocoPhillips’ oil-sands assets for $13.3 billion. Cenovus’s purchase was financed by an April 2017 debt offering run by Bank of America Corp., JP Morgan Chase & Co. and Royal Bank of Canada -- which last year ranked 13th, second and first on the list of largest "extreme" financiers.

Coal-mining enjoyed a small rebound, up 6.5 percent, to $15.1 billion, after plunging 38 percent between 2015 and 2016 -- brought down after 195 nations adopted the Paris climate accord in December 2015. Four Chinese banks dominate financing to coal miners and they did less of it last year. The biggest European and North American banks in coal financing in 2017 were Credit Suisse Group AG, Goldman Sachs Group Inc, and JPMorgan.

The report also ranked 36 banks by the value of loans and underwriting provided to the "extreme" fossil fuel sectors. The most common letter grades are D, D-minus and D-plus. All four Chinese institutions and Japan’s Mitsubishi UFJ Financial Group earned Fs in each of the six fossil-fuel categories.

The bright spot, in the eyes of the environmentalists, was France’s BNP Paribas, which earned the highest grade in the analysis, a B-plus for vowing to bring its business in line with the Paris Agreement. The bank’s policy eliminates project-level financing for oil sands, Arctic oil and LNG terminals built to export shale gas.

Paris Paradox

The restrictions BNP Paribas has imposed on itself illuminate the paradox at the heart of the report: For nations to meet their Paris Agreement goals, no new fossil fuel project can be developed. Even tapping all the currently developed and planned reserves would put the climate into the danger zone, according to the report.

The study casts the banks’ "extreme" work as counter-examples in a global energy industry otherwise rapidly adopting a cleaner and more socially responsible palette.

Many banks tout their clean-energy finance and investment, such as the $30 billion Goldman has tapped since 2016.

A spokesman for HSBC said that the bank "is committed to an orderly transition to a low carbon world," and has pledged $100 billion in finance and investment. Citigroup Inc. has also set a $100 billion goal for environmental finance and plans to "use its skills and assets to accelerate capital markets solutions to major environmental problems," according to its environmental and social policy statement.

Bank of America has reduced its exposure to coal in recent years, and since 2007 has made $87 billion available to clean energy and sustainable businesses, a spokeswoman said.

Other banks featured in the analysis either declined to comment or did not immediately respond to requests for comment.

To contact the reporter on this story: Eric Roston in New York at eroston@bloomberg.net.

To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net, John Harney

©2018 Bloomberg L.P.