Pressure on banks to meet net zero goals could backfire by handing a growing share of global energy projects to Chinese lenders, The Mail on Sunday has been told.
Banks in Europe fear they could be punished by regulators if they lend to fossil fuel projects around the world.
Despite the UK’s departure from the EU, British banks seem unlikely to step in and take advantage as the authorities here are also concerned about climate change.
Ana Botin, boss of Spanish-based bank Santander, the biggest lender in Latin America, told an international conference in Marrakech, Morocco last week that her bank is under pressure not to invest in an Argentinian shale gas field even though the country will need supplies for decades.
‘It’s a huge opportunity for Argentina,’ Botin told the Institute of International Finance meeting. ‘So when we European banks are – I’m not going to say forbidden – pressured, then a lot of savings in Europe cannot finance this kind of development.
Taking advantage: A banking source said Chinese banks are the most likely to gain if Europeans banks stop energy lending in the developing world
‘Same thing in many African countries where European banks are either not there or not willing to go there.’
Botin said that while ‘green’ investment was needed, there was a much bigger requirement for so-called ‘brown’ funding – such as in the Argentinian project.
A senior banking source in the UK said the approach of regulators was having a ‘chilling’ impact on such investments.
Last year the European Central Bank warned lenders that failing to tackle financial risks from climate change would result in higher capital requirements and the imposition of fines.
The ECB said: ‘Deadlines will be closely monitored and, if necessary, enforcement action will be taken.’
Since leaving the EU, Britain has gained the ability to diverge from the EU’s rules. However, despite Rishi Sunak’s much-publicised efforts to slow down the transition, net zero goals formed part of recent financial services legislation.
Since 2021 the Bank of England’s mandate from government has included ‘supporting the transition to a net zero emissions economy’.
Without changing these it could be hard for British banks to take advantage of the reluctance of European lenders to invest in oil and gas assets, the source said.
US banks have a freer hand under Jerome Powell’s chairmanship of the US Federal Reserve. Powell has dismissed the notion of central banks becoming involved in climate change efforts.
The banking source said Chinese banks are the most likely to gain if Europeans banks stop energy lending in the developing world.
