Britain’s largest domestic bank Lloyds has announced it would not support direct financing to develop new oil and gas fields, joining a small number of lenders to push back on funding expansion of the industry.
Lloyds said it would no longer provide finance to new clients in the oil and gas sector, unless it was for “viable projects into renewable energies and transition technologies” developed by companies with “credible” net zero transition plans in place.
The bank also confirmed it will longer directly finance new greenfield oil and gas developments, either through project finance, or reserve-based lending.
Other projects that it would not support moving forwards include upstream oil or gas exploration; development and production in the Arctic region and Antarctic territories; and ‘reserve based lending’ or ‘borrowing based financing for oil and gas companies in the Arctic’.
It will also stop providing ‘project specific finance’ for any projects which involve the exploration, extraction, production, refining, storage or transportation of fossil fuels from oil sands, or to companies involved in similar activities. Coal liquefaction, as well as any finance involving onshore oil and gas and shale fracking, will also be banned moving forward.
Campaigners have praised the move as setting ‘a new standard for the UK banking industry’.
“Our sustainability strategy outlines our commitment to support the UK’s transition to a sustainable, low-carbon economy,” the bank said in the update. “We support the aims of the 2015 Paris Agreement, and the UK government’s commitment to a Net Zero economy by 2050, which we recognise will require a radical reinvention of our ways of working, living and doing business.”
It said its move to stop providing financing for new oil and gas projects would complement its ongoing effort to work to ensure all its existing clients had “credible and impactful” transition plans in place by the end of 2023. Development of assessment methodologies and an engagement strategy that would enable it to help clients establish these plans is well underway, the bank said.
Lloyds also set out its intention to tackle methane emissions by aligning itself with the Global Gas Flaring Reduction Partnership (GGFR) and endorsing the World Bank’s Zero Routine Flaring by 2030 initiative.
“Lloyds’ new policy marks an important turning point in the dangerous relationship that exists between leading UK banks and fossil fuel companies,” said Tony Burdon, chief executive of pressure group Make My Money Matter.
“By becoming the first of the five largest UK high street banks to stop the direct financing of new gas, oil, and coal projects, Lloyds is making a clear statement on the future of financing for fossil fuel expansion.”
Lloyds’ exposure to dirty industries is smaller than some of its global rivals, given its focus on Britain’s economy.
The bank provided about 1 billion pounds ($1.1 billion) of finance to commercial oil and gas customers last year, according to its latest climate disclosures report, and the sector accounted for just 0.2% of its overall lending.
The International Energy Agency (IEA) has warned that no new exploration should take place if the world is to hold temperatures at 1.5 °C, the target set out in the Paris Agreement during COP21.
