Chinese banks will profit from the West’s net zero obsession
Pressure on banks to meet net zero emissions targets could backfire by handing over a growing share of global energy projects to Chinese lenders, The Mail on Sunday has been told.
Banks in Europe fear regulators could punish them if they lend to fossil fuel projects around the world.
Despite the UK’s departure from the EU, it seems unlikely that British banks will step in and take advantage of the situation, as authorities here are also concerned about climate change.
Ana Botín, head of Spanish bank Santander, Latin America’s largest lender, told an international conference in Marrakech, Morocco, last week that her bank is under pressure not to invest in an Argentine shale gas field even though the country will need supplies. for decades.
“It is a great opportunity for Argentina,” Botín said at the meeting of the Institute of International Finance. ‘So when we, the European banks, are (I’m not going to say banned) under pressure, many savings in Europe cannot finance this kind of development.
Taking advantage: A banking source said Chinese banks are the most likely to gain if European banks stop lending for energy in the developing world.
“The same thing happens in many African countries where European banks are either not there or are not willing to do it.”
Botín said that while “green” investment was needed, there was a much greater need for so-called “brown” financing, as in the Argentine project.
A senior banking source in the UK said regulators’ approach was having a “chilling” impact on such investments.
Last year, the European Central Bank warned lenders that failing to address the financial risks of climate change would result in higher capital requirements and the imposition of fines.
The ECB said: “The deadlines will be closely monitored and, if necessary, enforcement action will be taken.”
Since leaving the EU, Britain has gained the ability to deviate from EU rules. However, despite Rishi Sunak’s much-publicised efforts to slow the transition, net zero targets were part of recent financial services legislation.
From 2021, the Bank of England’s government mandate includes “supporting the transition to a net zero emissions economy”.
Without trading them, it could be difficult for British banks to take advantage of European lenders’ reluctance to invest in oil and gas assets, the source said.
US banks have more freedom under the chairmanship of Jerome Powell of the US Federal Reserve. Powell has dismissed the idea of central banks getting involved in climate change efforts.
The banking source said Chinese banks are the most likely to gain if European banks suspend energy lending in the developing world.