Lloyds Banking Group has become the first full-service British bank to walk away from directly financing coal, oil and gas projects.
New North Sea greenfield oil and gas developments permitted after 2021 now fall outside the banking group’s criteria for support either in lending against client assets or in project-finance, its updated sustainability policy declares.
This week’s revision of Lloyds’ new ESG – environmental, sustainable and governmental – policy goes deeper and wider than February’s most recent declaration.
Now no longer fundable by Lloyds, the revised index makes clear, are upstream exploration by clients for hydrocarbons, and development or production activities in the Arctic and Antarctic, both super-sensitive zones at the forefront of the manmade climate emergency.
Specific to fossil fuels, the document promises: “Lloyds will not provide financing to new clients in the oil and gas sector unless it is for viable projects into renewable energies and transition technologies, and clients have credible transition plans”.
Tars sands such as in Alberta, Canada are now explicitly beyond Lloyds’ support.
Coal extraction and the mineral’s use in power generation now receive the bank’s further rebuff. The document says it will no longer finance:
- “entities that have a revenue greater than 25% derived from thermal coal generation by the end of 2022 and 20% by the end of 2023;
- “..new or expanded coal-fired power plant development
- “new entities that have plans to increase thermal coal power production capacity;
- “direct investment in coal power operations of energy.. unless for decommissioning coal-burning assets
The banking group says it makes an exception in the UK for coal-linked borrowers who’ve pledged to keep turbines spinning in reserve against the energy emergency arising from Putin’s war on Ukraine.
Coal liquefaction projects will now go without the bank’s cash. Any mining project reliant on thermal coal for 5% or more of its revenues will also be turned away, says the policy.
On hydroelectric generation worldwide, Lloyds Banking Group promises it will not finance new large dams for projects that are inconsistent with the World Commission on Dams Framework.
Its strengthened ESG protocol commits Lloyds to help clients in shifting their business models towards greener longevity. “As part of our commitment to supporting the transition to a sustainable, low-carbon economy, we will work with our existing clients to support them to establish credible and impactful transition plans”, the ESG protocol declares.
In addressing them, the bank says it recognises it “will require a radical re-invention of our ways of working and doing business”.
Agriculture, mining and cultivation of soya oil are among red light areas of lending covered in Lloyds extended ESG.
ShareAction, the City-based campaigning organisation co-ordinating eco-conscious shareholders, has engaged in recent years with Lloyds on its ESG guidelines.
Jeanne Martin, the NGO’s head of banking, commended Lloyds for its initiative, and urged its competitors Barclays and HSBC immediately to follow suit.
She had reservations, however. “Asset-level financing is only a fraction of the financing provided by banks to new oil and gas”, Martin pointed out.
”Lloyds Banking Group should not rest on its laurels but instead urgently turn its focus to the companies behind these new oil and gas fields.
“With only a few years left to prevent the worst impacts of climate change, it’s vital that banks ensure their funding accelerates, not hinders, the transition to Net Zero”, Martin urged.