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Fossil fuel financing from the world’s largest banks dropped by more than US$70bn in 2023, a report has found, yet an increase in backing for trade in LNG has prompted a backlash from climate campaigners. 

Overall lending and underwriting to companies with fossil fuel exposure has dropped from US$961bn in 2021 to just under US$706bn last year, according to the latest edition of Banking on Climate Chaos, a detailed report produced by a group of climate-focused NGOs. 

However, the LNG market has bucked that trend. The report finds that between 2022 and 2023, financing for companies that are expanding import and export capacity for methane gas grew from US$116bn to US$121bn. 

In North America alone, the report singles out three LNG infrastructure projects, including pipeline construction and capacity building, that have attracted a combined total of US$57.7bn in lending and underwriting. 

Authors of the report, which include BankTrack, Oil Change International, Reclaim Finance and Urgewald, say that ongoing expansion of gas facilities poses a major climate risk. In the US alone, 12 terminals awaiting government approval would produce the equivalent carbon emissions as 223 coal plants over their lifetimes, the report says. 

There is “clear and growing evidence that methane gas exports are inconsistent with global climate targets, they drive up domestic US energy prices, and they harm local communities and critical ecosystems”, the NGOs argue. 

The global LNG market has been radically reshaped following Russia’s invasion of Ukraine in 2022 and the subsequent imposition of sanctions on the country’s energy exports. That year alone, the share of Europe’s natural gas supply sourced from Russia dropped from around half to just 10%. 

This supply shift has proven a lucrative opportunity for US producers of LNG, whose revenues from exports to Europe grew more than fourfold in the months following the war.  

Energy companies have since backed natural gas as a vital tool to keep the continent’s energy supply stable. Last year the US became the world’s top exporter of LNG for the first time, ahead of previous leaders Australia and Qatar, with around two-thirds of shipments destined for Europe, data from Kpler shows. 

Gas has also been touted as a transitional fuel by the energy industry, with proponents claiming it is a less polluting alternative to coal while renewable energy production is ramped up. 

But the report says communities impacted by fossil fuel infrastructure expansion believe LNG is a “false solution” to concerns around sustainability and energy security. 

It is now three years since the International Energy Agency called for an immediate halt to all new fossil fuel projects, warning the industry must focus solely on reducing emissions from existing assets to keep global warming below 1.5°C. 

The issue remains controversial in the US, with the Biden Administration pausing all authorisations for new LNG export facilities in the country. 

Energy producers expressed “disbelief” at the decision, although industry experts argued the country could triple exports without the need for new infrastructure. 

 

Banks under pressure 

Lucie Pinson, founder and director at Reclaim Finance and a co-author of the report, criticises the banking sector for “continuing to channel money into fossil fuel expansion, despite the clear warnings from climate science”.  

“They appear to be particularly blind to the risks associated with the expansion of LNG, continuing to finance new LNG facilities in the US, Africa and Papua New Guinea, as well as import terminals in Europe,” she says. “This will lock us into fossil gas for decades to come, adding to greenhouse gas emissions, especially potent emissions of methane.” 

US Democrat congressman Ro Khanna adds: “The science is clear: to tackle today’s climate crisis we must hold Big Oil accountable for its role in the climate crisis. 

“Unfortunately, this report shows that banks are continuing to finance projects that will increase emissions, despite their public climate commitments.” 

The report names Mizuho, MUFG, Santander, Royal Bank of Canada and JP Morgan Chase as the five banks that have provided the most financing to companies involved in importing or exporting LNG.  

Mizuho provided nearly US$11bn, it says, while the other four provided a combined total of over US$18bn. 

Contacted by GTR, a JP Morgan spokesperson says: “As one of the world’s largest financiers to both traditional and clean energy companies, we help power today’s global economy. We believe our data reflects our activities more comprehensively and accurately than estimates by third parties.  

“Reflecting our strategy of supporting the build-out of zero-carbon power, we set a net-zero aligned energy mix target and will disclose a clean energy supply financing ratio.” 

A Santander spokesperson says: “We are fully committed to supporting the transition to net zero and have set emission reduction targets for 2030 across a range of material emitting sectors within our loan book, including power generation, thermal coal, and energy (oil and gas), among others. 

“All financing decisions are guided by a strict policy framework approved by our board of directors.” 

MUFG and Mizuho declined to comment, and Royal Bank of Canada had not responded as of press time.