European banks have loopholes to keep financing coal, study finds

A survey of policies at 25 European banks by nonprofit ShareAction revealed that the industry is also underreporting its support of high-carbon sectors

Friends of the Earth at a rally to oppose a new coal mine near Whitehaven in Cumbria, northern England. Photo: Friends of the Earth

European banks still have loopholes that would allow them to continue financing coal, despite signing up to climate alliances that target net-zero emissions, according to a study by nonprofit ShareAction.

A survey of policies at 25 European banks revealed that the industry is also underreporting its support of high-carbon sectors in general, ShareAction said on Monday. The same study found that most banks aren’t measuring biodiversity risks when assessing clients and projects in which to invest. The study didn’t identify specific coal projects financed by banks.

“Banks have made promises to investors and the public — it’s time they deliver on those commitments,” Peter Uhlenbruch, director of financial sector standards at ShareAction, said in a statement.

The study comes only days after the world’s biggest climate-finance coalition, the Glasgow Financial Alliance for Net Zero, lost one of its biggest members. Vanguard Group Inc. said last week it would exit the GFANZ sub-alliance for asset managers, after judging the burden of meeting firm-wide climate goals too onerous.

Beyond Europe, banks have continued to finance coal projects. Banks, mostly based in China, helped coal companies raise $9.9 billion via loans and bond sales, according to data compiled by Bloomberg in March. That’s more than double the $4.4 billion raised during the first three months of 2021.

ShareAction ranked banks in terms of their environmental policies across everything from climate risk, to biodiversity strategy and engagement with stakeholders. Three French banks — BNP Paribas, Societe Generale and Credit Agricole — got the highest scores. Commerzbank of Germany, Danske Bank of Denmark and German lender DZ Bank got the lowest scores.

“While the number of banks announcing asset financing restrictions on new oil and gas fields has doubled in eight months, banks are reluctant to introduce any restrictions for new oil and gas at the corporate level,” the report found.

Even the best-performing bank, BNP, only got an overall score of 63%, meaning it “still has a long way to go,” ShareAction said. It’s urging banks to set targets that guarantee a reduction in absolute emissions in the real economy. It cited La Banque Postale’s requirement that companies publish credible transition plans and Crédit Mutuel’s comprehensive policy to phase out coal as examples of the right approach.

ShareAction also found that very few European banks are adapting their risk management to reflect the threat to ecosystems. And targets to protect natural habitats are “almost non-existent,” it said. “This is unlikely to change in the short-term as biodiversity was not a board-level priority for most banks,” it added.