Biggest Oil Bank in Scandinavia Braces for an Activist Wave

The top banker in western Europe’s biggest oil producer says she’s ready to fight the growing number of activists pressuring her to stop funding the petroleum industry.

Kjerstin Braathen, the chief executive of Norway’s biggest bank, DNB ASA, says fossil-fuel divestment and exclusion are “dangerous” ways to try to reduce carbon emissions. Her main argument is that cutting the flow of cash to Norwegian producers would allow less scrupulous actors to step in, and ultimately impede the transition to sustainable fuel.

“It could be a dangerous strategy if the result is that we are building up more gray markets that are not regulated, that are not transparent, that aren’t impacted by regulation,” Braathen said in an interview. She also says that “this isn’t only about oil and gas.”

There’s evidence to suggest that companies that end up on some exclusion lists easily find new sources of finance. A variety of funds, including some of the world’s biggest, already are stepping in to fund fossil fuel projects as banks pull out, often buying portfolios at a discount.

Share prices can come out unscathed. Commodities giant Glencore Plc, for example, was dumped by the world’s biggest sovereign wealth fund, Norges Bank Investment Management, in May last year. Since then, its share price has soared about 130% as Vanguard Group Inc. and others boost their stakes.

More than two decades since the world agreed to adopt the Kyoto Protocol in an effort to fight global warming, there remains disagreement over how best to reform polluters. Asset managers and banks are still deciding whether to pressure the worst emitters from the inside, or exclude them from financing altogether.

Arguably, neither exclusion nor internal pressure have yielded adequate results so far, as temperatures continue to rise. The International Energy Agency warned in May that no new oil, gas or coal resources should be developed, if the world is to avoid a climate catastrophe.

Read More: Time for Banks to Think About Fossil Fuel Exposure

Braathen says it’s naive to think that the world will stop using oil altogether in the coming decades. She also says the Norwegian producers that DNB finances have proved that they can cut emissions more than their competitors. Norway’s biggest oil producer, state-backed Equinor ASA, has abandoned shale and plans to cut its net carbon intensity by 40% by 2035. It also plans to spend over $50 billion on renewable and low-carbon energy through 2030.

Read More: Equinor Speeding to Transition Strategy, 50% Green Capex by 2030

But banks in Europe are under pressure to show they’re taking climate change seriously as historic legislation requiring them to reveal their carbon exposure gets rolled out.

DNB earlier this month stepped up plans to get greener, saying it will finance and facilitate 1.5 trillion kroner ($175 billion) of sustainable activities by 2030, and increase the assets under management in ESG funds to 100 billion kroner by 2025.

DNB manages about 700 billion kroner in assets now, so it is “a meaningful proportion,” Braathen said. “But I think this is no exact science. We are in new territory setting targets and the way we think about it is that, in a year’s time we will review it.”

If it turns out that progress is faster, “then we will accelerate it,” Braathen said.

DNB has the highest exposure to fossil fuels in the Nordic region, having financed more than $23 billion since 2016, after the Paris climate agreement was struck. Meanwhile, the bank financed about $6.5 billion in green projects over the same period, according to data compiled by Bloomberg.

Such statistics have exposed DNB to criticism from non-governmental organizations, and the lender was shamed earlier this year in a publication compiled by Oxfam IBIS and BankTrack, among others.

And the scrutiny is set to intensify. Proposed European regulations will require banks to reveal their so-called green asset ratios. Rating agencies are also already warning that banks with loan books exposed to climate risks might ultimately face higher capital requirements.

Braathen says that such pressure may ultimately make it more difficult to guide other industries toward a cleaner future. “Turning your back -- you can do that on one sector,” she said. “But no one can do it for every sector, and every sector has its issues.”

©2021 Bloomberg L.P.

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