“An investor who buys a green product has a good chance of helping Total, Shell or BP to finance themselves”

Pquick guess: which companies use “green finance” the most, these ESG-stamped products (respecting environmental, social and good governance criteria)? Those that pollute? Or those who participate in the fight against climate change?

The first, of course, as calculated by a study by the British think tank New Financial, to be published Tuesday, October 26. In the European Union, polluting companies (mainly oil and mining companies) issue 43% of green bonds; “clean” businesses account for 7% – the rest comes from businesses that do not fit into either of these two extreme categories.

Phenomenal growth

“As such, it’s not a bad thing, specifies the study. This shows that capital markets can help companies reduce the environmental or social problems they create. “ Certainly. But it also means that an investor who buys a green product thinking of putting his money at the service of the fight against global warming has a good chance of helping Total, Shell or BP to finance themselves. The funding will of course go to a “green” project, for example the development of a wind farm, but in favor of an oil major … “There is a real risk that the ESG label will offer these companies an opportunity to practice greenwashing – the greening of their image “, worries William Wright, the director of New Financial.

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This drift was inevitable. Green finance is experiencing phenomenal growth: green bond issuance across the world quintupled in five years to $ 569 billion in 2020, while ESG investment fund outstandings quadrupled to $ 1.8 trillion , according to New Financial. At this scale, only large companies can supply enough “green” projects, including the oil majors.

The risk is the bursting of a “greenwashing” bubble, if this happens, the whole sector will come out tarnished.

This growth crisis is also giving rise to financial products that are increasingly distant from the reality of green projects. Former banker Julien Lefournier and economist Alain Grandjean describe in their book, The Green Finance Illusion (L’Atelier, 243 pages, 21 euros), the emergence of loans and bonds “Indexed on sustainability” (« sustainability-linked bonds – SLB »). Clearly, the investor lends money not for a specific green project, but on condition that the company makes environmental or social progress. Problem: the objectives to be achieved are freely defined, “Self-assessed under the loving gaze of an external third party”, accuse the authors. What if the company does not meet them? “The penalty is ridiculous (…), a few basis points on the total line of credit. “ The worst illustration is that of TotalEnergies: in February, the French major promised to issue only SLB-type bonds, which means that these supposedly “green” products will allow it to finance all of its activity, including… its oil exploration.

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“An investor who buys a green product has a good chance of helping Total, Shell or BP to finance themselves”