Britain’s biggest bank, Lloyds Bank, will no longer provide direct finance to fossil fuel projects under its new climate policy.
The financial giant has announced that it will not finance any new gas, oil and coal projects to support the The UK’s transition to a sustainable low carbon economy.
This allows Britain’s biggest bank to join a small group of lenders pushing back on financing the expansion of the fossil fuel industry.
Lloyds Bank’s new climate policy
Hailed as a ‘radical reinvention’, Lloyds Bank’s new climate policy will continue to provide general loans to businesses in the sector, but prohibit project finance or loans earmarked for fossil fuel projects.
A statement from the policy said that:
“Managing the potential impacts of climate change, how our customers engage with the opportunities and challenges created by climate change, and the need to transition to a low-carbon economy play a key role in our approach to sustainable development risk management.
The British bank also added that it encourages its customers to minimize their dependence on carbon-intensive sources of income in order to accelerate the move to a low carbon economy. He further stated that he would stop working with customers who do not meet their new climate requirements.
Environmental groups have welcomed the lender’s decision while calling on other UK banks to do the same.
For Tony Burdon, CEO of Make My Money Matter:
“Lloyds’ new policy marks a significant turning point in the dangerous relationship that exists between Britain’s major banks and fossil fuel companies.
The bank is the first of the UK’s five biggest lenders to suspend direct funding for new fossil fuel projects.
The move comes just weeks after the UK pledged to try new exploration in the North Sea on energy security concerns. The British government has announced dozens of new oil and gas licenses in the region to boost domestic production.
Banks and other financial institutions are under increasing pressure to end support for companies that are making the climate crisis worse.
The trend to end fossil fuel financing
Fossil fuel financing from the world’s largest lenders has totaled $4.6 trillion over the 6 years since the signing of the Paris Agreement in 2015.
- $742 billion from this went to fossil fuels funding for 2021 alone, according to estimates.
Lloyds had invested around £1 billion ($1.1 billion) to its commercial oil and gas customers in 2021 according to its climate report. This figure represented a very small fraction of its total loans – only 0.2%.
The bank’s exposure to the dirty industry is relatively low compared to its global competitors. This is because it only focuses on domestic loans.
But his decision reflects the growing trend of pressure on banks to help accelerate the transition to a low-carbon economy as the next round of COP climate conferences take place in Egypt next month.
While other banks are tightening their climate lending policies in line with the Paris Agreement, most major lenders in the United States, however, continue to support the expansion of the sector.
Earlier this year, three major US banks – Citigroup, Wells Fargo and Bank of America – rejected shareholder proposals to align lending practices with climate goals.
The chart below shows the top banks promoting fossil fuel financing from 2016 to 2021. JP Morgan tops the list.
But Lloyds Bank promises to take climate into account in its credit assessment process. It said it has dedicated sustainability training to staff to deliver on its climate pledge.