"Sustainability-Linked Loans" - No Disclosure, No Teeth And No Commitment To Spend On Environmental Improvements

Shell got one. So did the pipeline company Enbridge. And last summer, energy giant Drax got its biggest one to date, worth more than half a billion dollars. These weren’t just any loans to massive corporations. They were made by some of the world’s largest banks at discounted rates, in exchange for commitments by each of these mega-polluting companies to improve their environmental practices. That may sound like a typical “green” loan. But these “sustainability-linked loans,” or SLLs, require little of the same accountability. Companies don’t have to spend the money toward their sustainability targets, and neither they nor the banks have to disclose interest rates, benchmarks for success or the penalties for falling short.

In the last several years, banks gave out more than $286 billion in these SLLs to hundreds of companies in environmentally damaging industries, including fossil fuels, mining and companies linked to significant deforestation, an investigation by The Examination, Toronto Star and Mississippi Today has found. That’s nearly 1 in 5 dollars out of all SLLs, the team’s analysis of data from the London Stock Exchange Group from 2018 to 2023 showed.

As climate change becomes more severe, with carbon emissions and global temperatures surging to record highs last year, pressure is on the biggest polluters to clean up their processes. But these loans are often used instead to help companies and banks improve their reputation without actually reducing environmental harms. In some cases, the loans have financed companies that were actively expanding polluting operations, the investigation found. “They do not lead to measurable change,” said Richard Brooks, climate finance director for the environmental nonprofit Stand.Earth. “And they’re really meant to greenwash your finances mostly for expansion activities.”

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Companies receiving these loans often sent out press releases trumpeting sweeping sustainability plans and broad goals but seldom made clear which, if any, targets were binding, the investigation found. Many that set goals for reducing carbon pollution used “intensity” of emissions rather than overall emissions. Intensity measures efficiency per unit rather than total emissions. For example, a company might highlight that it has reduced methane emissions per head of cattle while failing to note it has increased the size of the herd. In several cases, the companies’ own documents showed that their overall emissions increased substantially even as they received SLLs linked to decarbonization.

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None of the banks or companies in this story would disclose specific benchmarks or financial details of their loans, many citing issues of confidentiality. Royal Bank of Canada, one of the lenders that financed the loans to Enbridge and Drax, said it follows industry practices and is vested in helping the environment. “Royal Bank of Canada is proud to have worked with our clients in recent years to deliver innovative financial solutions including sustainable finance,” the bank said in a statement, adding that its criteria for this financing were in “alignment with widely accepted global and Canadian industry standards.”

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https://www.theexamination.org/articles/how-mega-polluters-take-advantage-of-billions-in-green-loans