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Dirty secrets: The “ESG” banks who still invest in oil

ESG Dirty Secrets

These days, every bank – from your run-of-the-mill Barclays branch, right up to the honking great global beasts – seem to be claiming that they’re helping the planet. You can hardly move for pictures of city trees and thoughtful looking men in helmets as they gaze out over a solar plant.

The letters “ESG”, which stand for “Environmental, Social and Governance” are boldly emblazoned across websites and social media ads like a revolutionary movement. And the marketing is working. These banks have even made it onto thematic ESG funds. So now, any well-meaning investor can pile money into them, safe in the knowledge that their savings will go towards planet-saving projects.

But…

There’s a glitch in the system. And it’s kind of an oily one. A slippery one. An oily, slippery, awkward glitch that banks really don’t want you to know about … Yep, you guessed it… These ESG banks are still investing in oil. Not a little bit. A lot. We’re talking hundreds of billions. Even as you read this sentence, oil drilling projects are expanding into places like the Gulf of Mexico[1] with the support of banks like these.

Here are five so-called “ESG” banks who are having their oily cake and eating it – as they collect ESG money while financing the dirty fossil fuel industry. You can find these shady holdings on the MSCI ESG Screened S&P 500, MSCI AWI Low Carbon target and the MSCI core Europe ETFs, among others.

1. JPMorgan Chase, the very worst fossil fuel financer in the world

The worst of the worst. According to 2021 research [2], JPMorgan Chase is the ringleader of fossil fuel investments. Since the Paris Agreement, this “sustainable” (lol) bank has pumped a jaw-dropping $316.7 billion into fossil fuels. For context, the GDP of Portugal is $231 billion. It’s CRAZY money.

So how can this bank qualify as “ESG”? According to their own reports, “Currently there are not adequate, commercially available low-carbon energy solutions for all of the world’s energy needs” [3]. Some fund managers – especially on the MSCI indices – have accepted this flimsy excuse and added JPMorgan Chase onto their ESG ETFs. Sometimes even within the top ten holdings.

While I understand the argument that we need a smooth transition, I don’t think JPMorgan Chase deserves the title of “ESG” just yet. I mean… That’s quite a jump, isn’t it? The bank has a LOT of work and atoning to do before it can deservedly call itself good for the planet.

2. Largest coal financer globally, the Bank of China

Despite featuring on several ESG funds – including (and I’m not joking) low carbon funds [4] – the Bank of China is the world’s number one funder of coal power! [5] Which is completely crazy, right? The bank has almost zero policies in place to reduce their reliance on coal [6]… So, it’s baffling to me how it ended up on these ESG lists.

Overall, the Bank of China is one of the fifteen largest fossil fuel financers in the world. And it’s showing little sign of improvement. The corporation even invested $5 billion more in dirty energy last year than it did in 2017! [7]

So, how did this bank make it onto the list? Well, in September this year, these guys pledged to stop financing “new coal mining” from “overseas” [8]. Huh. If you think that’s enough to deserve our ESG money, good for you, but I think it’s a load of greenwashing. Promising to do a tiny bit less damage surely should not qualify a company as ESG.

3. Europe’s worst fossil fuel enabler, BNP Paribas

I’m going to confess a (dis)interest here. I used to work for BNP Paribas, creating the kind of greenwash marketing that I am now so fiercely against. Believing the bulls*** and helping the bank win a series of Environmental Finance awards is probably the worst thing I’ve ever done. The awards made BNP Paribas seem more credible and gave it a green stamp of authenticity that attracts sustainable investors. So, it’s with a heavy heart that I see BNP Paribas both on the ESG fund lists and the Climate Chaos Hall of Shame. [9]

The truth is that, while BNP Paribas was a pioneer in green bonds, the bank undermines itself by investing billions upon billions in dirty fossil fuels. Disturbingly fossil fuel financing DOUBLED in 2020 [10]. It went from $28.900 billion in 2019 to a spine-chilling $40.751 billion [11]. The CEO is fond of saying that BNP Paribas has “Paris” twice in the name and so the organisation follows the Paris Agreement with vigour. But the truth is that the bank has invested more than $120 billion [12] in fossil fuels since the accord was signed and shows no indication of slowing. This is greenwashing at its most extreme.

4. Deutsche, the bank for coal, oil, and gas

Oh Deutsche. You know those kids in school who never come top in anything but always score highly for everything? That’s what Deutsche is for financing dirty fossil fuels. According to the latest research, the corporation is consistently ranked within the top 20 worst banks in the world, for LNG, oil, fracked gas, tar sands and coal [13]… How do you say “greenwashing” in German…?

In 2020, Deutsche shovelled a whopping $9.126 billion into fossil fuels, which is an improvement on 2019’s $11.180 billion [14]… But let’s not forget that 2020 was a year when oil plummeted. We’re going to need to see more proof of a consistent cut-back in dirty energy before we can call this bank “ESG”. So far, it’s not looking good as Deutsche has zero policies in place, saying instead that it will reveal them in 2022. Manage your expectations, I doubt that their green pledges are going to blow anyone’s mind.

5. Bank of America, the fourth worst fossil fuel financer in the world

The Bank of America appears on several ESG funds. But it surely cannot be for environmental reasons because this financial house is the fourth heaviest dirty energy investor in the world. Since 2015, the bank has invested nearly $200 billion in oil, fracked gas, tar sands, coal and more. For God’s sake, the bank hasn’t even signed the Paris Agreement. So… uhh… Why is it on the “ESG” list…?

One possible reason is that in April 2021, the Bank of America increased its “Environmental Business Initiative Target” to $1 trillion by 2030 [15]. That’s nice, I guess… But what about all the billions of dirty fuel investments?

This is the thing I don’t get – why we are rewarding companies based on their promises and not their actions? Imagine if a kid trashed their bedroom but promised to tidy it by 2030. Would you give them a load of money and good publicity? Probably not, right? You’d tell them to clean up their mess and stop being cheeky. So why are we accepting it with banks who literally destroy our planet?

6. Lloyds, 7. Nordea, 8. Royal Bank of Canada…

…There are many more “ESG” banks investing billions in dirty energy. I’m only listing five here, because I don’t want this article to drag on for too long. Otherwise this whole thing gets super depressing, and we all lose what little faith we have left in financial services. Plus, Christmas is around the corner.

But also on the shortlist are Lloyds [16] – who invested more in dirty energy in 2020 than they did in 2019. Nordea [17] who are in the top 50 fossil fuel financers. And Royal Bank of Canada [18] who just can’t get enough of extracting tar sands. All these banks rake in money from ESG funds. And all these banks are investing in planet-destroying fossil fuels. What. The. Hell.

“Clear, fair and not misleading” – Where is the FCA of greenwashing?

Believe it or not, but I have nothing against oil investments. (Well… sort of). What I have a problem with is lying. Or “greenwashing”, as it’s called in this case. If you’re going to be an absolute d***head and profit from destroying the planet, you’ve got to be honest about it. Own it. Like a Disney villain on steroids. That’s the minimum. What’s completely unacceptable is to trick people into thinking that you’re saving the world when you’re genuinely killing it. Taking money under false pretences is fraud, like, AT BEST.

So, here’s what I think should happen. In the same way that investment firms need to have a clear “Capital at risk” disclaimer which is easily visible to customers, I reckon “ESG” banks should have one which says, “INVESTS IN OIL”. Nice and bold. Right there, on the home page, where everyone can see.

I think any ESG marketing material needs to clearly state how much finance the bank has poured into fossil fuels that year. To my mind, the FCA should impose anti-greenwash rules as fiercely as they impose the “Capital at risk” requirements. After all, financial services are obliged to ensure that their content marketing is “clear, fair and not misleading” … And what could be more misleading than an “ESG” bank that secretly invests in oil?

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