Banks including some of Europe’s largest lenders have helped fossil fuel companies to raise more than €1tn (£869bn) from the global bond markets since the Paris climate agreement, according to an investigation by the Guardian and its reporting partners.
In the push to zero carbon, Europe’s biggest lenders face growing pressure to limit their financial support for fossil fuel companies through direct loans and other financing facilities.
But analysis of thousands of transactions since 2016, when more than 190 countries agreed at a UN summit in Paris to limit global warming by curbing pollution, has revealed that lenders including Deutsche Bank, HSBC and Barclays have continued to profit from the expansion of oil, gas and coal by supporting the sale of fossil fuel bonds.
The findings have raised concerns among sustainable investment campaigners that banks are continuing to offer “hidden” financial support to energy companies that are responsible for increasing the world’s carbon emissions – even as they pledge publicly to phase out direct lending for new projects.
The Guardian worked alongside other European newspapers and the Dutch platforms Investico and Follow the Money to look in detail at 1,700 bond issues recorded by the financial information provider Bloomberg.
Bonds are issued by companies to help raise funds for specific projects, or their general operations. They effectively act as an IOU between the company and investors purchasing the bond. Banks earn fees by underwriting and marketing the bonds to their clients and other investors, and by providing advisory or administrative services. Underwriting banks guarantee bond sales by buying them before selling them on to investors on the global bonds market. Typically a single bond issue will involve the help of multiple banks.
The investigation focused only on bonds from energy companies identified by the campaign group Urgewald as having publicly disclosed their aims to increase their production of fossil fuels, and only since the Paris climate agreement. The agreement enshrined the goal to limit rising temperatures to well below 2C above pre-industrialised levels. Climate experts have warned that no new fossil fuel projects are compatible with the Paris accord.
The research revealed €1tn in such bonds issued through the global bond markets since the start of 2016. Big borrowers included Brazil’s state-owned oil company Petrobras and Russian state oil company Rosneft. The Paris agreement committed global governments to taking action.
Europe’s top facilitators of fossil fuel bonds, according to the research, were Germany’s Deutsche Bank, Britain’s HSBC and Barclays, and the French banks Crédit Agricole and BNP Paribas.
As pressure grows on Europe’s financial centres to adopt climate compatible policies, many banks have moved away from classic lending relationships with big fossil fuel companies towards more indirect support by helping to issue corporate bonds, according to campaigners.
Most banks choose not count the bond sales they are paid to work on when measuring their performance on climate change, even though the funds raised play a large role in supporting new high carbon projects for some of the biggest emitters.
Climate experts, including Andreas Rasche, the professor of business in society at Copenhagen Business School’s Centre for Sustainability, have criticised the banks for failing to take responsibility for their role in helping fossil fuel companies to access funds through the bond market.
Rasche said: “Participating in underwriting activities makes banks complicit in the emissions arising from bonds issued by oil and gas companies. You help them raise money, and you know what this money will be used for – thereby you are involved in the activity.”
Campaigners suggest the global bond markets have emerged as “the back door” for big polluters planning to access financing for their projects amid growing scrutiny of direct bank financing.
“We cannot ignore the bond market any longer,” said Alice Delemare Tangpuori, a strategist for the climate campaign group the Sunrise Project. “The role of banks has been quite hidden. But they are essentially the cheerleaders for these bonds.”
“Fossil fuel companies are effectively using bonds as a back door for raising money,” Delemare Tangpuori said. “The same companies are now turning to the bond market to raise funds. And the same banks are more than happy to help them do that. Access to the bond market is the kill switch for those looking to defund fossil fuel companies.”
Lara Cuvelier, a sustainable investments campaigner with Reclaim Finance, said: “It’s a way for them to keep working with these companies, to keep the commercial links in place. Helping these companies raise funds on the bonds market shows an unwillingness to break these ties and stop supporting fossil fuel companies.”
“This new money that they are helping these companies access is not compatible with their commitment to reach net zero by 2050,” Cuvelier added. “This investigation clearly demonstrates the urgent need for banks – and also for investors – to adopt sector specific policies that cover all financial services, including bonds.”
According to the research, Deutsche Bank was the biggest, acting as an underwriter or bookrunner for fossil fuel bonds that raised a total of €432bn since the Paris climate agreement. At the same time, the bank promised to reduce its “financed emissions” for the oil and gas sector by 23% by 2030 and 90% by 2050.
The bank said in a statement that it “has significantly reduced its engagement with the oil and gas sector since 2016 and in particular last year”. It added that Deutsche Bank has “no intention at all to shift the scope of business from lending to bond issuance for clients in the fossil fuel sector”.
The research found that the British bank HSBC facilitated bonds that raised €423bn for fossil fuel companies since 2016 while pledging to shrink its financed emissions for the oil and gas sector by 34% by the end of the decade, before reaching net zero by 2050.
HSBC did not respond to a request for comment.
At the same time, the French banks Crédit Agricole and BNP Paribas helped to issue bonds that raised €351bn and €295bn respectively, according to the investigation. Crédit Agricole has pledged to reduce its financed emissions to zero by 2050. BNP Paribas said earlier this year it would stop all financing for new fossil fuel projects, but the policy still allows the bank to finance the fossil fuel companies themselves.
A spokesperson for BNP Paribas said the historic scope of the investigation did not reflect the bank’s recent progress in “turning the page on fossil fuels”. The bank claimed that its share of the bond market for oil and gas companies had fallen to 0.99% in 2023, compared with a market share of 3.39% in 2020.
Crédit Agricole said the decision to exclude bond arrangements in its climate targets was in accordance with the methodology adopted by an alliance of banks during the Cop26 UN climate talks in Glasgow in 2021. “However, once the bond is held by the investor, it is taken into account in their invested issues,” the bank’s spokesperson said.
London-headquartered Barclays is one of few banks that includes its capital markets activities in its ambition to become a net zero bank by 2050. The bank helped fossil fuel companies to raise bonds worth €350bn in the years since the Paris agreement, according to the research.
A Barclays spokesperson said the bank’s climate targets, which were set in 2020, cover not only its direct lending but also the capital markets financing it has facilitated, such as bond issuance. “We were one of the first banks to do this,” the spokesperson said.
The investigation found that Mexico’s state oil company, Petróleos Mexicanos, emerged as the largest beneficiary of fossil fuel bonds after raising €115bn since 2016. Petrobras has raised €38bn in the same period while Roseneft raised €34bn. Shell and BP raised €31bn and €29bn from fossil fuel bonds respectively.
