Some of Europe’s largest banks are phasing out trading services for the export of oil from the Ecuadorean Amazon, a move that reflects the growing focus of global banks on climate change and their shift away from increasingly risky fossil fuels.
On Monday, Switzerland’s Credit Suisse Group AG and Holland’s ING Groep NV said that they were excluding new transactions related to exports of Ecuador’s Amazonian oil from their trading activities, citing climate change and concerns for the Amazon rainforest and its Indigenous people.
France’s BNP Paribas SA, the largest bank in the eurozone and one of the region’s trading powerhouses, said in December that it would immediately exclude from its trading activities the seaborne exports of oil from the Esmeraldas region in Ecuador under its latest environmental finance policies.
Ecuador isn’t one of the world’s top oil producers, but petroleum exports are a key contributor to the country’s economy. Petroecuador, the nation’s state-owned oil company, didn’t respond to requests for comment.
The banks’ flight from Amazonian crude follows last year’s crash in oil prices and growing fears of so-called stranded assets, which are fossil fuels that lose value due to the world’s transition to cleaner forms of energy. In December, Credit Suisse said its lending to the oil-and-gas industry fell to $6.9 billion in the third quarter of 2020 from $7.7 billion in the first quarter.
“Assessing the environmental and climate change risks of funding a particular project is becoming a key legal notion for the banking sector and trade financing operations,” said Monica Feria-Tinta, a lawyer at London-based firm Twenty Essex.
As those risks mount, more European investors are turning away from fossil fuels.
“We have divested from all the top oil majors because not only are they major greenhouse gas emitters, they also carry risks for devastating spills and other negative social and environmental impacts,” said Anders Schelde, chief investment officer at the $20 billion Danish pension fund AkademikerPension.
Banks are also facing calls from environmentalists and Indigenous peoples to limit their involvement in fossil fuels. In Ecuador, a campaign by activists and Indigenous people spurred ING and Credit Suisse to reduce their exposure to the Amazonian oil trade. The nonprofits Stand.earth and Amazon Watch published a report last year that called out banks – including ING, Credit Suisse and BNP Paribas – for their financing of Amazonian crude.
“The banks identified in our report faced serious allegations of double standards for making climate pledges while continuing to finance the trade of Amazon oil,” said Moira Birss, climate and finance director at Amazon Watch.
She said the new commitments from the banks are a positive step towards strengthening protection of the Amazon rainforest and respect for indigenous rights in the region.
A spokesman for ING said the lender shared many of the concerns in the report, which is why it is reviewing its exposure to the oil and gas trade flowing from the Ecuadorean Amazon. “In the meantime, we have decided not to engage in any new contracts for the financing of oil and gas trade flows,” from the region he said.
Credit Suisse’s decision to pull out of Ecuador’s Amazonian oil trade was part of the bank’s regular updates to its growing sustainable finance efforts, a spokesman for the bank said. “As part of our commitments to address climate change, protect biodiversity, and respect human rights, we introduced further restrictions on financing fossil fuels in the course of last year,” he said.
Banks and insurers are also cutting ties with Arctic oil drilling. This month, Axis Capital Holdings Ltd. joined fellow insurers AXA SA and Swiss Re Ltd. in pledging not to underwrite any new oil-and-gas drilling in the Arctic Wildlife Refuge in Alaska.
The six biggest U.S. banks – Citigroup Inc., Bank of America Corp. , Goldman Sachs Group Inc., JPMorgan Chase & Co., Morgan Stanley and Wells Fargo & Co. – have also said they would end funding for new drilling and exploration projects in the Arctic.
In the U.S., the Office of the Comptroller of the Currency under the Trump administration passed a “fair access” rule that would limit the ability of banks to deny lending to specific industries, including fossil fuels. The rule, which is set to go into force on April 1, could end up reversed or delayed under the Biden administration, policy analysts say.
