Energy giant Shell has come under pressure from climate activists due to skyrocketing profits. Credit: Daniel LEAL/AFP
Barclays uses its 'Sustainable Finance Initiative' to fund Shell amid growing regulatory concern over green money laundering by banks.
A lender has classified a $10 billion revolving credit line set up for Shell as «social and environmental finance», The Telegraph may disclose information, raising new questions about the impact of the «Environment, Social Responsibility and Governance» investment movement.
According to an analysis of the bank's loan classification system, Barclays has calculated its share of the loan to meet its $150 billion target for social and environmental finance.
Shell's loan was acceptable as the fees and interest rate were linked to progress towards the carbon intensity target. The company aims to reduce the carbon intensity of the energy products it sells by 9-13% by 2025 compared to 2016 levels.
However, since the $10 billion credit line was first announced in 2019, Shell has resisted pressure to cut its emissions amid soaring oil and gas prices due to its invasion of Ukraine.
In June, chief executive Wael Sawan unveiled plans to keep oil production at current levels through 2030 and expand its gas business, drawing criticism from environmentalists. Shell claims it hit its target eight years early by selling its U.S. hydraulic fracturing business.
In recent months, regulators have become increasingly concerned about the potential misuse of sustainability-related loans (SLLs) and the lack of transparency regarding their environmental goals.
In June, the Financial Conduct Authority issued a warning letter to financial institutions about “potential risks to market integrity and suspected fraud in the context of SLL.”
Shell CEO Wael Sawan unveiled plans in June to keep oil production at current levels until 2030. Credit: REUTERS/Thomas Peter
He said he was concerned about «weak incentives, potential conflicts of interest and assumptions of low ambition and poor design.»
The FCA's concerns have sparked a backlash against investments in ESG as different parts of the financial system appear to be applying different standards in order to achieve unmatched goals. NatWest's recent «debanking» scandal of Nigel Farage has also raised concerns about the politicization of lending.
According to Shell's latest financial report, the revolving credit line has been extended multiple times and is still active.
The credit line was jointly negotiated for Shell in 2019 by Barclays and Bank of America, with financing provided by a syndicate of 25 banks including BNP Paribas, Citigroup and Deutsche Bank.
Bank of America, Deutsche Bank , Citi and BNP Paribas declined to comment.
A Barclays spokesperson said: «We believe Barclays can be most successful by supporting our customers in the transition to a low-carbon economy, facilitating the funding needed to change existing business practices and scale new environmentally friendly technologies.
“Sustainability-related loans and bonds facilitate the integration of sustainability factors into a broader set of products and offer an additional means of engaging clients with sustainability considerations. In our disclosures, we separately classify sustainability-related loans and green finance.”
Shell said the company has achieved all of the targets of the carbon-intensity loan program to date.
Critics say just using carbon intensity without using total emissions targets means Shell can significantly increase total carbon emissions while still meeting loan requirements.
Commenting on planned investments in oil and gas projects, the report says it: “Data on our capital investments in production and integrated gas…. shows that according to the spending plans we laid out at our Capital Markets Day event in June, future spending will be about $1-$2 billion a year lower than past averages.”
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