Banks have started the great race towards the decarbonization of their balance sheets to adapt to the objectives of the fight against climate change and reduce their exposure and risk to the sectors and companies that postulate themselves as big losers of the great ‘green’ revolution . In the last two weeks, Santander and BBVA have announced their commitment to reduce financing for coal and other polluting economic activities by 2030. The announcement, which will gradually spread to the rest of the large national banks, involves the cleaning of more than 12,000 million euros in this type of assets, according to an investigation by the ONG Urgewald.
Santander was the first to make a move by announcing on February 22 that from 2030 it will not finance those electricity companies whose business derives more than 10% from coal or those directly engaged in the activity mining. This objective has added a series of milestones and flying goals that the entity intends to meet in the coming years, such as eliminating unnecessary single-use plastics in 2021 or consuming electricity at its corporate headquarters of origin 100 % renewable in 2025.
12 days after Ana BotÃn To announce its ‘green commitment’, BBVA responded last Friday by announcing that it will also abolish its coal financing before 2030 in developed countries and by 2040 in the rest of the countries where it is present. The bank that runs Carlos Torres It will limit its resources, if applicable, to all groups that obtain more than 5% of their turnover in a way related to coal, and also extends its veto selectively to other activities with impact environmental such as agribusiness, energy, infrastructure and defense.
Santander and BBVA are the two Spanish banks that are currently most exposed to polluting financing due to their international profile. Only between the two add up to three quarters of those 12,000 million euros that Urgewald attributes to the Spanish bank. This amount includes loans, guarantees and other financing instruments with different energy companies with a wide presence in the world of coal, such as the Italian Enel -endesa’s parent company-, or directly with mining groups such as Glencore. In any case, the Spanish are only a part of the more than 4,400 institutional investors and 665 banks all over the planet that currently continue to finance coal and that they will have to turn their policies towards the ‘green’ economy.
Leaving aside coal will only be the first of the steps but not the most important, since this fuel represents only a small part of bank balance sheets when compared to the weight of others such as oil or gas. . In the case of BBVA, for example, financing for the latter two multiplies by 107 that of coal mining. Santander, for its part, indicates that it will make public in 2022 its withdrawal objectives in the field of hydrocarbons.
The rest of the large groups are expected to follow in the wake of Santander and BBVA after having signed the Collective Commitment to Climate Action promoted by the UN. This manifesto urged entities to gradually withdraw their funding for the most polluting activities, be more transparent in the publication of their metrics related to climate change and encourage the contracting of financial products with an impact positive environmental.
Beyond their commitment to climate change, banks are obliged to act to comply with the new regulatory requirements designed by the European Central Bank, which from 2022 will launch its climatic stress tests to monitor the actions of entities in this field. Santander and BBVA have gone ahead, but current European regulations require all banks to publish their specific decarbonization targets as of 2023. This examination will require identifying those risks that may affect the capital ratios of each group, specifying potential physical and transition risks, as well as their potential evolution in various scenarios in the short, medium and long term.
At the national level, the project Climate Change and Energy Transition Law It obliges companies to produce an annual report on the exposure of their activity to the risks of climate change and the measures adopted. Other jurisdictions where stress testing exercises are already carried out: Holland, France and England.
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