In a new report, Debt to the Planet, ShareAction assesses and ranks Europe’s 25 largest banks on their approach to climate and biodiversity, provide leading practice examples, and concluding with a list of recommendations.
The report finds that most banks’ disclosures only cover their lending activities. However, banks also help their clients raise financing from investors by arranging equity and bond issuances. Only two of the banks – Barclays and HSBC – also include these capital markets activities in both these disclosures, and one other bank – Santander – includes them in their financing disclosures. Not reporting this activity misrepresents the level of financing the bank is directing to high carbon sectors, some of which rely heavily on debt financing as opposed to conventional corporate loans.
The report found that between 2016 and 2021, 57% of the financing provided to the top 50 upstream oil & gas expanders was in the form of capital markets underwriting. Although capital markets activities don’t appear on a bank’s balance sheet (as the banks don’t take on credit risk), it underplays transition risks to banks as the investment banking division can earn significant fees from capital markets underwriting.