(Bloomberg) -- Climate activists have singled out a group of fossil-fuel companies that together have $491 billion of bonds outstanding, in a campaign designed to cut funding for producers that are still expanding their carbon-intense operations.
The bond market has emerged as a “back door” through which oil, gas and coal companies are obtaining financing for new or growing projects, said Nick Haines, manager at nonprofit SumofUs. “As bank lending for coal has tightened, the bond market remains a safe haven for fossil-fuel companies to fund expansion,” he said.
Urgewald, the Sunrise Project and other civil society organizations behind the campaign launched Tuesday listed 30 companies planning to build out their production of oil, gas or coal, including Exxon Mobil Corp., Saudi Aramco, Chevron Corp., BP Plc and Shell Plc. The International Energy Agency said last year such expansion plans will undermine global efforts to limit the rise in the average global temperature to the critical threshold of 1.5 degrees Celsius.
“No one has yet looked at the sheer amount of money that has been going into companies that have big expansion plans across coal, oil and gas,” Alice Delemare Tangpuori, senior bonds strategist at the Sunrise Project, said in an interview. “If you zoom in on the fossil-fuel sector and look at just the companies with the biggest expansion plans, particularly for coal, it shows they are heavily reliant on bonds.”
Greenhouse gas emissions rebounded last year to their “highest level in history,” the IEA said in a recent report. To underscore the sense of crisis, United Nations Secretary-General Antonio Guterres has warned that the planet is now “sleepwalking” toward a “climate catastrophe.”
The next step of the nonprofits’ campaign will be to name and shame creditors and bond underwriters supporting those corners of the fossil-fuel industry that are ignoring the IEA’s guidance on no new fossil-fuel supply projects.
The nonprofits also found that coal companies with the biggest operational expansion plans raise 2.5 times more capital via bond markets than through bank loans. In India and China, bonds are now the main source of coal finance, according to an analysis by the Sunrise Project, which drew on data from Urgewald’s Global Coal Exit list and corporate financial statements.
According to Bloomberg data, coal companies have raised more than $12 billion from bonds so far this year, well exceeding the roughly $5 billion raised in the same period of 2021. That’s one of the busiest starts to a year since the Paris climate accord was struck in late 2015.
For the world to avoid catastrophic levels of warming, the UN Intergovernmental Panel on Climate Change has said that a halt to investment in and a rapid phase-out of coal mining is needed. It’s also called for a “substantial reduction” in overall fossil-fuel use and financing.
“We can no longer afford to dismiss the bond market when taking on fossil-fuel expansion,” Haines said.
The nonprofits said the five companies spending the most on exploration for new oil and gas resources are PetroChina Co. Ltd, CNOOC Ltd., Shell, China Petroleum & Chemical Corp. and Pemex Corp. They said the five companies with the biggest short-term expansion plans in oil and gas are QatarEnergy, Gazprom PJSC, Saudi Aramco, Exxon and Petrobras.
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