Wednesday

27th Sep 2023

EU and US banks fuelling climate 'hypocrisy' in Africa

  • France's BNP Paribas was the biggest European commercial investor in African fossil fuel projects between 2019 and 2022 (Photo: Can Pac Swire, Flickr)
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As the 27th climate conference (COP27) takes place in Egypt, a new report came out on Tuesday (15 November) detailing how Western banks are financing a new wave of fossil-fuel expansion on the continent.

In it, French NGO Reclaim Finance and Urgewald, a Germany-based group, as well as 36 African civil society organisations identify the financiers and investors behind 200 oil and gas companies active in Africa.

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Between January 2019 and July 2022, 325 commercial banks channelled over €98bn to companies that are developing new fossil projects in Africa, most of it from North American, European, and Japanese banks.

French banks, particularly BNP Paribas and the Crédit Agricole Group through its subsidiary Amundi, are singled out as the most active European supporters of fossil fuel projects on the African continent.

The top five lenders involved during this period were Citibank ($5.6bn), JP Morgan ($5bn), France's BNP Paribas ($4.6bn), Bank of America United States ($4.1bn) and Société Générale ($4bn).

Most Western banks have joined the Net-Zero Banking Alliance (NZBA), launched in April 2021, which requires them to reduce the emissions associated with their investments to zero by 2050.

It covers 40 percent of global assets, and 70 percent of the €98bn channelled to African fossil fuel projects comes from NZBA-banks. But the green rules only include direct loans.

Western banks and investors underwrote €55bn worth of bonds issued by African lenders on behalf of the companies, but these operations are not covered by the NZBA code — a system Katrin Ganswindt, finance campaigner at Urgewald, described as "net-zero hypocrisy."

"Net-zero commitments for tomorrow are meaningless if today's finance keeps flowing into the expansion of fossil fuel production and use," she said.

On the investor side, the situation is similar, albeit less direct. US investment giants BlackRock and Vanguard and European pension funds and insurers have also made net-zero pledges.

But indirectly, they have backed fossil-fuel expansion in Africa by buying bonds from companies actively developing new fossil-fuel projects.

In July 2022, 5000 institutional investors held shares and bonds totalling €109bn in those companies.

Fossil-fuel expansion

All this money has led to a boom in new fossil-fuel activity on the continent.

Since 2017 an area larger than France and Italy combined has been licensed for new oil and gas exploration in Africa. Companies are currently searching for new reserves in 45 African countries, and Egypt, the host of COP27, is one of the top destinations.

According to data from Urgewald's Global Oil and Gas Exit List (GOGEL), oil companies will add 15.8bn barrels of oil to their production reserves in Africa before 2030. This only includes fields already in active development or close to it and can start production within the next one to seven years.

The extraction and combustion of these resources would release eight gigatonnes of CO2 into the atmosphere — more than double the EU's annual emissions.

Most of these projects are geared towards exports and are dominated by foreign companies like Canadian oil and gas company ReconAfrica and French supermajor TotalEnergies, the company responsible for more new fossil-fuel projects on the continent than any other company.

Research by Oil Change International, a Washington-based NGO not involved in the study, had previously shown foreign multinational corporations own two-thirds of the projected new gas and oil production in Africa by 2050.

Oil companies like TotalEnergies insist their investments in oil and gas benefit local communities. But Mozambique is one of the largest energy producers in Southern Africa — and may become one of the largest liquified natural gas exporters by 2026 — but it has remained energy poor.

And a recent report by the environmental organisation Friends of the Earth detailed how a gas discovery off the coast of Mozambique fuelled an Islamic insurgency in 2017, which is ongoing today and has led to thousands being killed.

"If we are going to export gas without using it ourselves," Carlos Lopes, a professor at the Nelson Mandela School of Public Governance at the University of Cape Town, told EUobserver. "Africa will continue to be the vulnerable provider commodities to sustain consumption elsewhere," he said.

"We don't want to enter into new dependency relation for energy," he added.

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