New phase-out measures announced by one of France’s largest banks, Société Générale (SocGen), which outlines how the company will exit the coal sector by 2030 in the European Union and OECD nations - and by 2040 for the rest of the world - have been labeled a “sham intending to mislead.”
Reclaim Finance, a Paris-based NGO and think tank that advises on fossil fuel divestment, has contended that the bank’s latest policy for a 2030-2040 phase-out strategy does not cover the financing subsidiaries of corporations active in the conventional energy sector.
Ranked among the top three banks in France by market size, SocGen will still finance some of the world’s biggest fossil fuel producers according to the think tank, which is funded by private foundations including the European Climate Foundation.
The organization has also identified a “rollover risk” on gas financing in the case of SocGen, which is one of the world’s largest funders of gas and liquefied natural fas (LNG). Among the bank's various ventures in the fossil fuels sector, SocGen is a significant financial advisor to the Rio Grande LNG export project in Brownsville, Texas.
The think tank indicated that further analysis of how financial flows to the coal sector evolves is required to understand just how SocGen applies its policy. But it argued that this phase-out policy does “not genuinely align with the climate catastrophe.”
Lucie Pinson, founder and executive director of Reclaim Finance, said, “One would have hoped that SocGen’s policy would be at the level of the Paris Financial Center’s best practices and meet the commitment they made one year ago to support a coal sector exit effectively.”
She added: “Regrettably, the bank’s policy could merely be a sham intending to mislead those who do not read the fine print.” On the surface measures being adopted by the bank appear to meet the principal criteria recommended by Reclaim Finance and its partners.
Commencing from now, SocGen says it is committed to no longer financing corporations deriving more than 25 percent of its earnings from coal that do not have a phase-out strategy aligned with the 2030-2040 timeline. This covers mining companies “directly operating or owning Thermal coal mining assets.” But the bank did not pledge to apply its policy to passive management, which makes up 40 percent of managed assets.
Thereafter and starting in late 2021, its commitment will be extended to other companies developing new coal-fueled power plants, or that do not have a phase-out strategy aligned with the 2030-2040 timeline.
Corporations such as RWE, Germany’s biggest power producer, should according to Reclaim Finance, “logically be excluded immediately” from being provided with finance from SocGen, given that RWE has direct ownership of coal mines and meets all the aforementioned criteria.
However, the bank’s policy appeared at first glance not to apply to mining behemoth Glencore, which in 2019 mined over 140 million tons of coal and made it one of the world’s ten largest coal producers. The majority of its financing comes the company’s parent, Glencore PLC, with several other financing subsidiaries besides.
Its subsidiaries dedicated to producing and trading coal, such as Prodeco in Colombia, Bulga Coal and Mount Owen in Australia, are well above SocGen’s exclusion financing threshold.
“BNP Paribas [BNP] may have been afforded the benefit of the doubt, the same does not go for SocGen,” Pinson said, “While BNP’s policy [concerning its coal phase-out plan] should result in an end to financing entities funding Glencore’s coal subsidiaries, SocGen’s policy clearly does not as they will continue financing a group whose coal production is fueling the climate catastrophe and is linked to egregious human rights violations.”
Apart from entities developing new projects beyond the end of 2021, corporations excluded from general financing by SocGen will still be eligible for “financing products and services dedicated to the energy transition.” This wording allows for the funding of projects replacing coal with gas and LNG projects, which SocGen often puts forth as “transition energies.”
In a clarification from SocGen issued after Reclain Finance’s initial view, the bank said that organizations as a whole will be excluded from financing “if they have not adopted a transition plan by the end of 2021” consistent with the objectives of exiting coal by 2030-2040. This could therefore cover Glencore.
Pinson stressed that tackling how fossil fuels are financed is “only the first step”, adding: “We generally welcome the move by SocGen, albeit it’s a very long one. However, they should not exit coal to increase [its] exposure to gas financing.”
Image credit: Benita Welter/Pixabay
A freelance financial journalist based in London and a former Financial Times staff writer covering stock exchanges, transaction services and trading technology, Roger Aitken has written for a number of B2B and B2C titles such as City A.M., Investors Chronicle, FTfm and Financial News as well as newspapers like The Guardian, The Independent and with Forbes as a contributor.