Fossil Fuel Financing Round 2: Lloyds Banking Group

This is the second of my blog series on Fossil Fuel Financing

 

Photo: Daily Mirro

 

The Fair Finance Guide cited Lloyds Banking Group as the 25th bank whose loans and underwriting activities can be attributed to the fossil fuel industry from 2009 to 2014. The report noted that during this period, Lloyds’ total loans and underwriting to the fossil fuel industry amounted to $10,047 million, while its loans and underwriting for the renewable energy industry amounted to $2,665 million. Where does Lloyds stand today?

Lending Exposure FY2015:

  • Lloyds Group’s total loans to the energy and water sectors amounted to £3,257 million, down from £3,853 in FY2014. As percentage of total loans, the FY2015 lending to energy and water was 0.71%, down from 0.79% in FY2014.
  • Lloyds Bank’s total loans to the energy and water sectors amounted to £2,966  million, down from £ 3,465 million in FY2014.  As percentage of total loans, loans in FY2015 to energy and water comprised 1.88% down from 2.09% the previous year.
  • Note that the Group and the Bank’s total commercial lending dropped in FY2015 from FY2014, a reflection of the global economic slowdown.

The bank does not disclose details of its oil and gas exposure, such as locations of companies to whom loans have been given, or type of business. It does not disclose Scope 3 emissions relating to its products. Its Scope 3 emissions disclosure is limited to travel.

Position on Climate Change (FY2015):

“We assess and manage social, ethical and environmental risk in our lending activity and the Group is a signatory to the Equator Principles which provide a framework for determining, assessing and managing environmental and social risk in project finance transactions. We recognise the need to address climate change, protect biodiversity, support local communities and ensure human rights are protected.” (p. 24, Annual Report and Accounts 2015).

“Our ability to help Britain prosper is inextricably linked to wider environmental issues. Man-made climate change and global trends such as resource scarcity, extreme weather and rising energy and commodity prices have an impact on our stakeholders and our own operations. We are committed to managing our direct environmental impact and reducing our greenhouse gas emissions. We do this through our Environmental Action Plan, which focuses on reducing risk and creating value through improved efficiency. More detail is included in our Environmental Statement, available online.” (p. 29)

Approach to Managing Lending Risks: 

“Within Commercial Banking, an electronic environmental risk screening system has been the primary mechanism for assessing environmental risk in lending transactions. This system provides screening of location specific and sector based risks that may be present in a transaction. Identified risk results in the transaction referred to the Group’s expert in-house environmental risk team for further review and assessment, as outlined below. Where required, the Group’s panel of environmental consultants provide additional expert support. The Group provides colleague training in environmental risk management as part of the standard suite of credit risk courses. Supporting this training, a range of online resource is available to colleagues and includes environmental risk theory, procedural guidance, and information on environmental legislation and sector-specific environmental impacts. The Group has been a signatory to the Equator Principles since 2006 and has adopted and applied the expanded scope of Equator Principles III. The Equator Principles support the Group’s approach to assessing and managing environmental and social issues in Project Finance, Project-Related Corporate loans and Bridge loans. Further information is contained within the Group’s Responsible Business Review (http://www.lloydsbankinggroup. com/our-group/responsible-business/our-approach/managing-risk/).” (p. 142)

Based on the above disclosure, Lloyds continues to be open for business to the fossil fuel industry. Similar to Barclays, it has not made any commitments that deviate from the norm among large banks.

#fossilfuelfinancing

 

 

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