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Green credit outperforms fossil fuels as ‘Big Oil’ gets money elsewhere

Green credit outperforms fossil fuels as ‘Big Oil’ gets money elsewhere

#Green #credit #outperforms #fossil #fuels #Big #Oil #money Welcome to Alaska Green Light Blog, here is the new story we have for you today:

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For the first time, more money has been raised in credit markets for climate-friendly projects than for fossil-fuel companies.

According to data from Bloomberg, around $580 billion was arranged for renewable energy and other green ventures in 2022, while the oil, gas and coal industries turned to lenders and underwriters for nearly $530 billion. But it’s not like green finance is finally trumping fossil fuel lending. Rather, Big Oil looks like it’s getting more cash elsewhere. High oil prices over the past year have likely freed energy companies from their reliance on capital markets, said April Merleaux, research manager at nonprofit environmental network Rainforest Action Network.

“We’re also seeing fossil fuel companies turning to less traditional sources of capital like private equity, which is much harder for us to track,” Merleaux said. With this in mind, “it is difficult to say with confidence that there is a new trend in credit markets that will continue into 2023.”

The big question for oil, gas and coal companies is how to use their balance sheets in the clean energy transition, Merleaux said. Currently, many say they plan to scale up fossil fuel production now and decarbonize later, she said.

“This is incorrect logic and not what the International Energy Agency (IEA) recommends,” she said. As for the banks, “they know what needs to be done, but we don’t see any signs yet that they are really ready to pursue their emissions reduction targets.”

climate ambitions

BANKERS these days are making significantly more revenue from selling green bonds and loans. In 2022, they raked in an estimated $3.3 billion in fees from these deals, surpassing the $2.5 billion they made from stringing together bonds and loans for the most polluting energy sectors, according to Bloomberg -Show data.

Credit Agricole SA, BNP Paribas SA and Bank of America Corp. ranked as the top arrangers of green bonds and loans last year, according to Bloomberg data, while RBC Capital Markets, Wells Fargo & Co. and JPMorgan Chase & Co. were the top providers to the fossil fuel industry.

But when you look at the bigger picture, Wall Street and its brethren remain clearly committed to funding the companies most responsible for global warming. Since the Paris Climate Agreement was announced in 2015, banks have raised almost $4.6 trillion for oil, gas and coal companies – double the $2.3 trillion raised through green lending and sales were taken from bonds.

But these big oil banks — including JPMorgan — say they have climate change ambitions and are expanding.

Last month, the New York-based bank announced new emissions reduction targets for airlines, cement makers and iron ore and steel companies. This complements JPMorgan’s initial targets, which focused on the oil and gas, electric power and auto manufacturing sectors.

Mixed reaction

JPMorgan said the six sectors now covered by its reduction targets account for the bulk of global emissions. According to the bank, the new targets should be in line with the IEA’s net-zero scenario by 2050.

Climate activists have had a mixed reaction to JPMorgan’s claims.

While the passage of additional sectoral targets is “great to see,” JPMorgan’s oil and gas commitments so far have “didn’t change its unwavering support” for the fossil fuel industry, said Lucie Pinson, director of environmental nonprofit Reclaim Finance. “The decision on the material impact of these new targets for cement and steel is pending.”

Merleaux and others have also questioned JPMorgan’s decision to focus on reducing the carbon intensity of its financing portfolio rather than committing to reducing absolute emissions. That agrees with a United Nations-appointed panel of experts who said companies and financial institutions should focus on reducing absolute emissions when setting net-zero targets.

JPMorgan has responded by stating that intensity-based metrics are the “most actionable way to assess client progress against climate scenarios.” Bloomberg News

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