European banks are jeopardizing any possibility of an energy transition by failing to take adequate measures to shift their financing from fossil fuels, according to new analysis from Reclaim Finance (1). Data for the 20 biggest European banks shows that they have participated in 982 deals to upstream or midstream oil and gas developers since 2021, locking in fossil fuel expansion. While banks are required to publish transition plans next year (2), the analysis shows that none of their plans will be credible unless they stop financing companies developing new oil and gas fields and LNG export terminals. Reclaim Finance has been joined by 14 NGOs in sending an open letter to the banks calling them to strengthen their policies in this regard (3). Above all, it is urging regulators to make ending finance for oil and gas expansion a strict criterion for transition plans and ensure that supervisors have the means to enforce it.

New analysis finds that the top European banks provided more than US$200 billion in finance for fossil fuel expansion between 2021-2023, with UK banks, Barclays and then HSBC the biggest backers of oil and gas developers (4).

Some banks have increased their financing over the period, including Italian banks Intesa Sanpaolo and UniCredit and Spanish bank Santander. And almost all of the top 20 banks have continued to finance companies developing new oil and gas upstream or midstream projects in 2024, with 166 new deals just this year.

Reclaim Finance found that the 20 banks provided over US$48 billion to the six largest European oil and gas companies, including BP, Shell and TotalEnergies, from 2021-2023 (5), and that while the banks often claim they are supporting these companies in their transition, 72% of this finance on average was for fossil fuel activities, and not for the development of non-fossil alternatives such as renewables (6). None of these companies can be considered “in transition” as they are still expanding oil and gas activities (7).

Deutsche Bank (89%), Intesa Sanpaolo (87%), UBS (87%), Barclays (87%) and UniCredit (86%) provided the highest proportion of finance to these six companies’ fossil fuel activities between 2021 and 2023, and the least finance to their non-fossil fuel activities.

For the first time we can unveil the truth about banks’ claims to be supporting companies like Shell and TotalEnergies to transition. The numbers show that in reality when they finance these oil and gas developers, European banks are primarily financing fossil fuels. Regulators must take note and ensure that banks’ transition plans are properly scrutinized, and not just a vehicle for yet more greenwashing.

Noam-Pierre Werlé, policy analyst at Reclaim Finance

In the open letter sent to the 20 banks and signed by ActionAid Denmark, Urgewald, ReCommon and BankTrack among others, Reclaim Finance warns that the banks are increasingly relying on decarbonization targets and weak sectoral policies, but these are not robust enough to drive change in financing of oil and gas.

Just 11 of the 20 banks analyzed currently have a policy in place to end finance to new oil and gas fields (8), of which only four restrict financing in some way to companies developing new fields (9). Reclaim Finance and its partners urge banks to introduce more robust sectoral oil and gas policies to address the transition.

Most banks are using the concept of transition finance to maintain business as usual with their oil and gas clients. However, companies developing new upstream or midstream oil and gas projects are not transitioning and are accelerating the climate crisis. To align their activities with a 1.5ºC scenario, banks should immediately exclude financing for such companies and support a just transition that leaves false solutions behind.

Quentin Aubineau, policy analyst at BankTrack

Intesa SanPaolo recently updated its policy on oil and gas, but a series of loopholes allow the largest Italian bank to continue and increase its financing to fossil fuel expansion, especially LNG, while UniCredit still ranks first among Eni’s international financiers, with loans amounting to $7.7 billion since the Paris Agreement to date, of which $1.6 billion in 2023 alone. A just energy transition can’t take place while banks continue to finance fossil fuel expansion, especially the six largest oil and gas companies.

Susanna de Guio, finance and climate campaigner at ReCommon

The analysis also finds that 10 banks have policies restricting finance for LNG export terminal projects (10), while just one has a policy restricting finance for companies that develop these projects (11). While French banks BNP Paribas and Crédit Agricole have said they will no longer support conventional bonds for companies active in upstream oil and gas, they have not excluded midstream developers. This is despite the clear path drawn by the International Energy Agency that to reach net zero by 2050 and limit global warming to 1.5°C, no new coal, oil or gas projects should be developed, including new LNG export terminals (12).

From next year, European banks are required to publish transition plans, including both their impact on the climate and their exposure to related risks. To ensure that these reports do not become a vehicle for greenwashing, Reclaim Finance is urging regulators to make ending finance for oil and gas expansion a strict criterion for transition plans, and to ensure that supervisors have the means to ensure that it is enforced.

Read the full report here.

Notes:

1. European banks and transition: time for a reality check, November 2024 see here 
2. European banks will be required to disclose transition plans under the Corporate Sustainability Reporting Directive (CSRD) and will have to comply with new requirements in the Capital Requirements Directive (CRD). 
3. See an example of the letters here, which is signed by NGOs including ActionAid Denmark, BankTrack, BreakFree Suisse, The Sunrise Project, ReCommon and Urgewald. 
4. From 2021-23, Barclays was involved in 258 transactions with upstream or midstream developers, and HSBC was involved in 237 transactions. In 2024, Barclays has participated in 42 transactions for oil and gas expansion, as of September 10, and HSBC has been involved in 31 transactions – see Appendix (5). 
5. Reclaim Finance looked at data for the six largest European oil and gas companies – TotalEnergies, Shell, BP, Equinor, Eni and Repsol – examining non-fossil-fuel related deals from January 2021 to December 2023 using data Bloomberg LP and IJGlobal. 
6. Non-fossil fuel encompasses power generation pure-play subsidiaries and projects that qualify as sustainable, including renewable energy projects and subsidiaries, but also bioenergy which is not considered as sustainable. In addition to power generation, industrial activities, such as bioplastic production or activities related to energy storage, are also included. 
7. None of the six largest European oil and gas companies can be considered “in transition” as they all continue oil and gas expansion, and all plan to allocate more than two thirds of their CAPEX to fossil fuel activities 
8. The 11 banks with restrictions on financing upstream oil and gas projects are BBVA, Barclays, BNP Paribas, Crédit Agricole, Crédit Mutuel, HSBC, ING Group, La Banque Postale, Lloyds Banking Group, Rabobank and Société Générale. See: https://oilgaspolicytracker.org/  
9. The four banks somehow restricting financing to companies developing new upstream projects are La Banque Postale, Crédit Mutuel, BNP Paribas and Crédit Agricole. 
10. The 10 banks with restrictions on financing midstream oil and gas projects are: Barclays, BNP Paribas, Crédit Agricole, Crédit Mutuel, Groupe BPCE, HSBC, ING Group, La Banque Postale, Rabobank and Société Générale.  See https://oilgaspolicytracker.org/  
11.  The only bank with restrictions on financing for companies developing LNG export terminals is La Banque Postale. 
12.  IEA World Energy Outlook 2024.