Fossil fuel financing on upward trajectory with trillions invested since 2015
While some lenders and financiers have signaled plans to stop funding polluting power stations, a new report shows that 33 global banks have poured $1.9 trillion into financing the fossil fuel industry as a whole since the adoption of the Paris Agreement. Big U.S. banks led by JPMorgan have invested most heavily.
With Morgan Stanley in 11th place and Goldman Sachs in 12th, all six of the U.S. banking giants are in the top dirty dozen fossil banks; together, they account for an astonishing 37% of global fossil fuel financing since the Paris Agreement was adopted.
Elizabeth Warren? AOC? Do you know about this?
All of this funding is done on the Greater Fool basis, the same model as the Housing Bubble. The projects are built with Other People’s Money, so the banks get paid in advance, and the buyers are left holding the bag on inherently unprofitable assets. Even Goldman Sachs, which started advising against investments in coal in 2013, is still selling them.
I have more bad news on Fossil Fool Finance. But next week I will have much bigger good financial news.
This is the report.
Banking on Climate Change: FOSSIL FUEL FINANCE REPORT CARD 2019
For the first time, this report adds up lending and underwriting from 33 global banks to the fossil fuel industry as a whole. The findings are stark: these Canadian, Chinese, European, Japanese, and U.S. banks have financed fossil fuels with $1.9 trillion since the Paris Agreement was adopted (2016–2018), with financing on the rise each year. This report finds that fossil fuel financing is dominated by the big U.S. banks, with JPMorgan Chase as the world’s top funder of fossil fuels by a wide margin. In other regions, the top bankers of fossil fuels are Royal Bank of Canada in Canada, Barclays in Europe, MUFG in Japan, and Bank of China in China.
Only earlier this week (Climate Challenge Will Be Harder Than It Seems, JPMorgan Executive Warns), as reported by Bloomberg, a JPMorgan executive said that the world is not cutting emissions anywhere near quickly enough, and called for politically unpopular changes in the U.S., such as carbon taxes.
Coal mining: Coal mining finance is dominated by the four major Chinese banks, led by China Construction Bank and Bank of China. Though many European and U.S. banks have policies in place restricting financing for coal mining, total financing has only fallen by three to five percentage points each year.
Coal power: Coal power financing is also led by the Chinese banks — Bank of China and ICBC in particular — with Citi and MUFG as the top non-Chinese bankers of coal power. Policy grades for this subsector show some positive examples of European banks restricting financing for coal power companies.
Oil and gas can have positive returns for a few more years yet, even though doom is on the horizon for both, but coal can only work at all where governments decide who pays what for energy, and customers have no say in the matter. Keep in mind that renewables have only threatened coal so far, and that we have to wait for batteries to ramp up in storage to hit hard at natural gas (Renewable Friday: Grid Storage), and in EVs to hit hard at oil (coming soon).
Oil Markets Ignore Warning Signs Of Looming Recession
Signs point to recession...but are oil markets taking heed? With the U.S. Federal Reserve, joining the IMF, the World Bank, and the OECD in making public statements about an impending economic slowdown, what are oil markets doing to prepare? Not much, apparently. The U.S. continues to push for higher oil production as U.S. stock and oil markets remain robust and bullish, but reality bites, and according to experts both “can be expected to correct.”
Have I mentioned that a crash is coming? Lately?
Stock market bubble: Fake News?
Meanwhile
Wall Street Loses Faith In Shale
The Wall Street Journal reports that the shale industry only saw $22 billion in new bond and equity deals, down by more than half from 2016 levels, which was a much worse time for the market.
The steep decline in new debt and equity issuance is a sign that major investors are no longer rushing to finance unprofitable shale drilling. It’s worth noting that this is a new development. For years Wall Street financed unprofitable drilling, holding out on the promise that rapid production growth would eventually pay off.
While there are some drillers that are profitable, taken as a whole the industry has been cash flow negative essentially since its beginning in the mid-2000s. For instance, the IEA estimates that the shale industry posted cumulative negative free cash flow of over $200 billion between 2010 and 2014.
Of course, when Wall Street itself is the Greater Fool...
Norway to dump oil from $1 trillion wealth fund. Norway has decided to exclude oil producers from its $1 trillion sovereign wealth fund, a significant move that highlights investor anxiety about the longevity of the oil business. The fund owns $37 billion in oil and gas shares, but the fund recommended the divestment in order to avoid the risk of volatile and low oil prices. “The goal is to make our collective wealth less vulnerable to a lasting fall in oil prices,” said Siv Jensen, finance minister of Norway. The plan still needs approval by parliament. Oil and gas stocks globally fell on the news.
Yes, I should hope so. Now how about putting a large chunk of that trillion into renewables and batteries?
Exxon asks SEC to block shareholder vote. ExxonMobil (NYSE: XOM) is trying to block a shareholder proposal that would direct the company to set targets for greenhouse gas emissions reductions. The oil major told the U.S. Securities and Exchange Commission that the shareholder resolution, which could be voted on at the annual meeting in May, is misleading.
“Exxon is trying to deny shareholders’ right to vote on a significant climate risk concern,” New York State Comptroller Thomas DiNapoli, who manages the state’s pension fund that is pushing the proposal, told Reuters.
We could do with a few more shareholder moves like this, and a good deal less regulatory capture.
Spoiler for next week: Quick Transition to Renewables & Electric Vehicles Could Save Planet & Trillions of Dollars, by SouthernLeveller
The lies just keep dying.