Last week, Bloomberg published the results of its third annual ranking of the “world’s greenest banks”: Citi was ranked first, followed by Santander and JPMorgan. The study assesses banks based on their lending to clean-energy projects and reduction in their own power consumption and carbon footprints. However, banks’ support for dirty energy, such as fossil fuel and nuclear power, is notably absent from Bloomberg’s methodology. When the value of banks’ finance for fossil fuels so often dwarves their investments in renewables, Bloomberg’s data does not even tell half of the story.

MEASURING THE GOOD, IGNORING THE BAD

One question mark over Bloomberg’s ranking is its definition of “clean energy”, and in particular its inclusion of hydropower (including large environmentally and socially destructive dam projects) and biomass/biofuels in this definition.

But the fundamental problem with its approach lies in the complete omission of banks’ investments in fossil fuels and nuclear energy.  While banks’ growing investments in green energy are to be welcomed, it is even more crucial that investments in fossil fuels drop drastically in the coming years if we are to have a chance of avoiding catastrophic global warming. The ratio of green to ’brown’ investments would provide a meaningful study on the level of “greenness” of a bank, but looking at clean investments alone makes this little more than a PR exercise for the banking sector.

To give a concrete example of this problem, BankTrack, together with urgewald, Groundwork and Earthlife Africa, released the “Bankrolling Climate Change” report in Durban in 2011. The report is an investigation into the coal investments of the world’s leading banks. We looked at the funding of 93 international banks in 71 coal companies between 2005 and 2011 to identify the “top 20 climate killer banks” in the world. The results show a significant overlap between Bloomberg’s “world’s greenest banks” and the top 20 climate killer banks. In fact, seven of Bloomberg’s top ten appear in the “Climate Killer” list.

Citi, which tops Bloomberg’s list, was rated the number two climate killer bank, and JPMorgan, our number one climate killer bank, is Bloomberg’s number three. Citi’s investments in the coal industry grew by 40% between 2005 and 2010 as the bank poured more than €13 billion into the coal industry. Citi’s profile on the BankTrack website links the bank to the controversial Keystone XL tar sands pipeline, as well as mountaintop removal coal mining and the controversial Alpha Coal project in Australia, expected to directly and negatively impact the Great Barrier Reef. This makes the “Greenest Bank in the World” tag a little hard to swallow.

ENVIRONMENTAL DIRECT IMPACT: BACK TO SUSTAINABILITY PRE-HISTORY

Another disturbing aspect of Bloomberg’s methodology is that “reductions in air emissions and water use and gains in energy efficiency” account for a full 30 percent of the score. These are banks’ “direct” impacts, e.g. their own use of energy for electricity and office heating. If this approach would have been understandable in the 1990s, it seems extremely dated in 2013, to say the least.

Numerous studies, particularly from NGOs including many from BankTrack members and partners in the past few years, have clearly demonstrated that banks’ primary environmental impacts are result from their core activities – their lending and investments – rather than through their “direct” impacts. While the sustainability debate in the banking sector started ten or twenty years ago with these direct impacts, the trend since then has been towards looking at the issues that matter: the impacts of banks’ finance. Methodologies for measuring these ‘financed emissions’ already exist, and BankTrack has long called on banks to report on these impacts systematically.

Management and reduction of direct impacts should be considered a ‘hygiene factor’ for banks, rather than a core issue. When Bloomberg reports that JPMorgan, which invested more than €16 billion in the coal industry between 2005 and 2011, “revamped its Park Avenue headquarters in New York, where energy-saving lights now dim automatically and a 54,000-gallon basement tank collects rain for flushing toilets and watering plants”, one has to wonder if it is looking down its telescope backwards.

STOP THE GREENWASHING

By avoiding mention of fossil fuels and nuclear energy, and by giving undue weight to banks’ direct impacts, Bloomberg’s “greenest banks” methodology is fundamentally, and it would seem deliberately, flawed. (Banktrack and partners Rainforest Action Network and urgewald already raised these concerns in a letter to Bloomberg last year).

The results of this study will now be used by the “world’s greenest banks” in their marketing and public relations material – a generous but undeserved gift to banks which are ploughing billions into environmentally destructive projects. This is a shame when there remain plenty of opportunities for Bloomberg, banks, analysts and other stakeholders to examine bank’s investments in fossil fuels, nuclear power, and their financed emissions. BankTrack will continue to denounce such greenwashing exercises in the coming months and years.

By Yann Louvel, Climate and Energy Campaign Coordinator for the BankTrack network.

Five years after mentioning the idea for the first time, the ‘big bang’ happened on the eve of the Christmas holidays: Crédit Agricole finally published its first six energy sector policies, covering coal power plants, oil and gas, shale gas, hydropower and nuclear power. While these bring some interesting developments – such as the exclusion of some finance for artic drilling and tar sands – they are plagued by multiple loopholes, and fall very short of the mark relative to BankTrack’s demands and what is needed for a true energy transition.

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The “Big Greenwash Circus”: that was the title of the conference I participated in  last Saturday in Brussels, with different workshops including one on the banking sector. Here is a summary of what I presented there with Frank Vanaerschot from FairFin, with a particular case study on Crédit Agricole, one of three main French banks.

On May 4th, France 2, one of the most famous French TV channels, broadcasted a TV report focused on greenwashing. The banking sector is one of the three sectors targeted in the programme, and more precisely Crédit Agricole. Watched by more than 1 million French people, this thirty minute investigation is a huge blow to the bank’s green reputation as it provides a deeply disturbing insight into the many strategies a bank can deploy to greenwash its activities. This way please…

THE STARTING POINT: SEAN CONNERY

The starting point of the TV report is the unforgettable ad for Crédit Agricole, with Scottish film star Sean Connery, claiming that “It’s time for green banking” against the backdrop of earth moving from a black fossil hell to a green renewables paradise. Really worth watching here, it is less than one minute long.

As advertisers themselves state in the programme, you couldn’t find a more shocking way of presenting things for a greenwash ad. It almost looks as if it was made on purpose for a satirical show, as a memory of propaganda movies from the 50s. Unfortunately, that is not the case and  journalists find out that this ad campaign costed 5.7 million euros to Crédit Agricole, including 4.2 million for Sean Connery alone. This amounts to a staggering fee of 79 245 euros per letter for him to pronounce the  sentence “It’s time for green banking”, without the breathings that is… It was a substantial investment but Crédit Agricole did win a contest with this ad: the Pinocchio prize, granted in 2010 by Friends of the Earth France, in the greenwashing category precisely!

If this is clearly the caricature of the caricatures, as even Stanislas Potier, the new head of sustainability at Crédit Agricole, recognises in the TV report, you don’t need to look hard to find amazing claims from other banks around the world, all pretending to save the planet: just check out those quotes on page 17 of our latest report “Bankrolling Climate Change” to understand that the sky is not even the limit for them.

THE HARSH REALITY: DODGY DEALS

Behind this beautiful picture we then discover the hidden part of Crédit Agricole’s activities, the ones that are not mentioned in its annual CSR report; its involvement in a series of dodgy deals around the world. Crédit Agricole forgot to mention its involvement in the coal fired power plants Medupi and Kusile in South Africa, as well as its involvement in the tar sands industry in Canada, or in offshore arctic drilling. This is also confirmed at the sector level as Crédit Agricole is one of the top 20 climate killer banks that has invested the most in the coal sector since 2005. Not so “green banking”, eh!

This comparison clearly shows the fundamental contradiction between how banks want to appear in public, their fantasy world for the entertainment of their reputation and the confidence of both their own staff and their customers, and the harsh reality of where they actually invest their money: not where their mouth is. This kind of psychological denial is also called “cognitive dissonance”. “Come on, we can’t be that bad!” so they think. Some of this dissonance is subconscious, but some of it is pure cynicism.

This is well illustrated by the words of Crédit Agricole’s head of sustainability himself, trapped by his mic that was still on after the interview, when we hear him say that arctic drilling, which he  understands well, is “very problematic, that Crédit Agricole shouldn’t be in this!”… right after defending the access to oil for Greenland in front of the camera. A double speech which makes us go crazy!

This is again illustrative of a permanent characteristic: companies, banks in this matter, seem to be fundamentally incapable to officially acknowledge their wrongdoings. This is also what makes many of their annual CSR reports such a mockery.

THE LITTLE NICE GREEN PROJECTS

This incapacity to tell the truth on dodgy deals is also illustrated by the immense desire of banks to show the “good projects” they finance. That was actually the initial purpose of the journalists coming to visit Crédit Agricole in the beautiful region of Brittanny, where Stanislas Potier is very proud to present a local biogas project.

As the reporter from France 2 rightfully emphasises, if this kind of project can indeed be “good”, the only problem is the scale of things. Comparing the induced emissions of the Medupi coal fired power plant in South Africa, financed by Crédit Agricole, and the ones off-set with this biogas project in Brittanny, they calculate that Crédit Agricole would need to finance 113.207 of such projects to compensate for the 30 million TCO2 emissions of Medupi alone! But they only have 25 planned in France up to now…

If it is true that banks finance more and more renewables, these kind of projects are also useful smoke screens to hide both the destructive impacts of the dodgy deals mentioned above and the fact that their financing of fossil fuels is also on the rise.

THE FORGOTTEN TOPIC: FINANCED EMISSIONS

Part of this hidden side of banks activities is the tool also mentioned in the programme on a topic banks have been historically reluctant to even pronounce: their financed emissions. Even in 2012 many international banks still present in their annual reports their “direct” GHG emissions, the climate impact resulting from heating, or cooling their offices, staff travel etc. However, over the years many studies have clearly shown that the key issue is not their direct impacts but the emissions resulting from the business activities they finance; their indirect emissions.

This is why in 2010 Friends of the Earth France and the consulting group Utopies published a tool to calculate the financed emissions of a bank as well as individual savings products. Which brings us to a disturbing fact that you never hear on TV (except for this time): having 5 000 euros  in your bank account at Crédit Agricole for a year is the equivalent of driving a SUV!

After denying any co-responsibility for years for these financed emissions, banks are now fighting on the methodology of the calculation itself while in the meantime their financed emissions continue to grow as much as their climate talk: nothing but hot air!

THE MISLEADING PARTNERSHIP

Back to the programme. After the visit to Brittany Elise Lucet, one of the most famous French journalists, brings us to the WWF France offices to meet with their director on their partnership with Crédit Agricole. The result is pretty outrageous, with WWF France head simply incapable to justify such a partnership in relation to their stated mission. Every year, WWF receives 400 000 euros from Crédit Agricole and ‘they have good discussions with them’, but we do not get to know more on the substance and results of these on-going discussions as nothing is ever written down! In return, Crédit Agricole can depict the beautiful panda in their annual reports and in its corporate communication. Guess what the public will remember…

THE FAKE ETHICAL SAVINGS PRODUCTS

The TV report ends with an investigation of the fairy tale-like “socially responsible investment” world. The French label “Novethic” that SRI saving products can receive is depicted as one the signs that the public would trust to buy “ethically”. Unfortunately, again, the report features a deeply disturbing interview with the SRI head of Amundi, the asset management subsidiary of Crédit Agricole, confronted with the fact that one of his SRI funds contains 13 oil companies, 7 car manufacturers and one weapons producer. His immediate reaction is to explain that they chose not to exclude any sector from their product. that oil is part of the economy, but that they want to avoid the “oil spill syndrom”. What a failure! The fund indeed also contains TransOcean, one of the companies involved in the Deepwater Horizon oil spill in the Gulf of Mexico! The SRI head of Amundi is stunned when he hears this.

This is unfortunately just another illustration of what you can find in those SRI funds, some of which contained both BP and TEPCO before the Deepwater Horizon oil spill and the Fukushima catastrophes: pure greenwash for the public!

If the report and this article focus on Crédit Agricole, most international banks use the same techniques in the same ways. There are other greenwashing strategies that banks can use, but this is already a pretty good exemplary tour! A great recipe for reporters around the world who want to debunk standardized corporate communication and bring shocking news to their public. That’s what is called “reputational risk” for the banks…

Next to its new policy on arctic drilling that our friends from Platform commented here, WestLB, the German bank, also last month published an update of their coal policy. If the first edition of their policy on “Coal-Fired Power Generation” already included interesting requirements for prospective clients, such as the need for operators “to provide the physical space necessary to carry out carbon capture (CCS)”, this new edition has even more on offer. This is for instance the first time that I see mentioned as a requirement to operators the need “to ensure that there is no feasible less GHG-intensive alternative/fuel/energy source”.

Another first of its kind criteria is the need for WestLB clients to have “GHG reduction targets (to) be in place, monitored and audited in accordance with the 2 degrees Celsius taget of the EU and UNFCCC”. These requirements, while self evident to us, are definitely not common practice in the banking sector today. They send the right incentives and warning signals to bankers and clients alike that future request for financing coal projects/companies will be intensely scrutinised, and will require more and more paper work to proceed.

All in all, with this coal policy WestLB takes a brave step in the right direction, for other bankers to follow swiftly. The only problem is that this mental shift in bankers’ brains needs to happen VERY quickly; the International Energy Agency itself stated in its latest World Energy Outlook that to have a chance of achieving the 2°C scenario, “all infrastructure built after 2017 needs to be zero carbon”. With CCS still being out of reach by then and with several years needed to build a new coal power plant, this basically means that investments in new coal power plants need to stop NOW if we want to be serious about combating climate change. That’s the difficult reality banks need to be confronted with and must act upon, or otherwise get rid of their intense climate speak…

More Information:

Yann Louvel, BankTrack Climate and Energy Campaign Coordinator