JP Morgan pledged to help clients align their businesses with Paris Agreement emissions targets, and Hong Kong and Shanghai Banking Corporation (HSBC) announced financing of up to $ 1 trillion for green energy.
A group of investors, valued at $ 20 trillion in assets, has urged emitters to move toward clean energy, and another group, valued at $ 5 trillion, said it would set lower emissions targets for the investment portfolio.
Writer Irina Slav said, in a report published by the American Oil Price website, that this trend is not considered recent, as American banks are reluctant to continue to provide loans to finance oil and gas companies – before the price collapse this year and the spread of the Corona epidemic. Concretely, it turned out that good productivity was lower than expected, borrowers were sinking more and more into debt, and banks had to protect themselves.
But this year, the trend has intensified dramatically as the green energy movement got a big boost from the post-pandemic recovery plans, and the authors of these plans claim that the only recovery that was logical inevitably passes through clean energy, and new opportunities have emerged for lenders.
For example, the European Union has made the use of at least 37% of the funds to finance green energy projects a condition for the distribution of its epidemic recovery funds amounting to $ 878 billion (750 billion euros), and this is not limited to Europe only, as investments have proven in sources Renewable energy this year is much more resilient and resilient compared to fossil fuel investments.
There was a real decline, but it was lower than that observed in the fossil fuel sector, however, it may be premature to abandon oil and gas, according to insiders of the oil and banking sectors, it is unlikely to do so.
Leslie Bayer, president of the American Petroleum Equipment and Services Association, and the National Trade Association of Oilfield Services and Equipment Industry, said in a statement to Oil Price that large-scale divestment of oil and gas would have negative effects on the sector but would also be detrimental to banks’ targets. .
Bayer explained that renewable energy technology has not been fully developed on a large scale to provide the energy the world needs, and even if this is not the case, oil and natural gas are an important part of the renewable energy supply chain, and that the current energy transition does not mean replacing one form of energy with another. , But aims to bring all forms of energy, and the entire energy ecosystem together, to provide the world with cleaner, more reliable and affordable energy.
Andrew Goldstein, president of Atlas Commodities, a commodity brokerage, said that moving to a fully renewable energy future would be difficult. “I don’t describe the shift to renewables as dangerous for the oil and gas industry as a whole, but the cost of supplying the planet. Energy from clean energy sources alone will be prohibitively expensive. “
On the other hand, Goldstein noted that renewable energy is attracting the attention of major oil companies and banks more, because it believes that the demand for such energy will rise in the future regardless of the challenges it faces.
But there is another thing about energy transition that banks should not ignore because their enthusiastic adoption of renewables and evasion of oil and gas would be a risk.
Paul Stockley, head of the oil and gas division of a UK-based law firm, acknowledged that there is a specific trend for banks and financial services providers to limit their dealings with the oil and gas industry.
Stokely added that a complete abandonment of oil and gas would hurt lenders and borrowers alike, and the truth is that many of the parties favoring the use of renewables tend to overlook this, but the oil and gas industry is well positioned to help the energy transition.
In the same context, Bayer added that there are one billion people who lack access to electricity services around the world, and energy demand will increase by 25% by 2040, and this reflects the importance of size and availability of infrastructure.
Abandoning oil and gas
Banks are not giving up oil and gas on their own. Rather, they are directed towards this path through further encouragement of investment in environmental, social and institutional governance and investor pressure for low-emission lending, as well as new regulations aimed at advancing the Paris Agreement agenda, however, It is noteworthy that even the International Energy Agency, which is the most prominent supporter of the transition to green energy, expects the oil and gas industry to continue for a long time and to continue supplying an increasing number of the world’s population with the energy they need.
According to Oliver Abel Smith, a banking partner at Fieldfisher, if banks abandon oil and gas companies and wipe them off their client list, which is unlikely, there will still be alternatives for the industry, including commodity dealers, private debt funds, and sustainability-related loans.
Ultimately, banks are pragmatic institutions, different from those driven by ideological concerns, and accordingly, they are unlikely to fully manage their emergence for oil and gas, but some companies may limit their dealings with this industry, in order to search for more respectable financial sources. For the environment.