"How mega-polluters take advantage of billions in green loans", 15 January 2025

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...“sustainability-linked loans,” or SLLs, require little...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...

...these loans are often used... 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...

Shortly after receiving an SLL...Enbridge expanded a pipeline carrying tar sands oil from Alberta to the United States, a project estimated to increase carbon emissions by the equivalent of 50 new coal-fired power plants.

...Drax has gotten a series of SLLs linked to producing cleaner energy as it shifts from burning fossil fuels to burning wood pellets — even though researchers say such a switch is worse for the climate. Drax is making plans to expand its wood biomass operations across the U.S.

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...

In several cases, the companies’ own documents showed that their overall emissions increased substantially even as they received SLLs linked to decarbonization.

Banks get several benefits from issuing SLLs: They lock in massive multiyear deals with major corporations and typically count these loans toward their own public targets for sustainable lending...

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.”...

“We strongly believe that a transition to modern bioenergy, in which biomass is sourced sustainably, is an important part of delivering a net zero world,” the company said in an emailed response to questions.

The company said in its 2023 annual report that its overall emissions were down and that it had already achieved some of its key sustainability goals, including an 89% reduction in emission intensity in its operations since 2020. Drax told The Examination that these gains were in large part due to replacing coal with “sustainably sourced biomass.”...

In August 2024, Drax accepted its largest SLL to date, renewing its 2020 loan in a deal that expanded its credit line from $369 million to $553 million...

Barclays said in a statement that its criteria for sustainability-linked finance was “consistent with industry practice” and that it couldn’t comment on individual SLLs for reasons of confidentiality. The Royal Bank of Canada said the same.

JPMorgan declined to comment, and Bank of America did not respond to repeated email and telephone inquiries...

Jointly created by banks and companies in 2017, sustainability-linked loans face little oversight. The contracts are private. The closest to a formal standard is a set of voluntary principles for SLLs developed by loan industry groups, which call for sustainability targets to be ambitious, to address borrowers’ core business activities and for compliance to be verified by outside reviewers.

In several countries where SLLs have surged in popularity, regulators and investors have spoken out about loans they said were being misused...

Independent research suggests that greenwashing in SLLs is widespread...