Chinese banks could dominate global energy projects as European rivals face net zero pressure
- European banks fear regulatory backlash for funding fossil fuel projects
- Santander under pressure to avoid investing in shale gas
- ECB warns of fines if banks don’t address climate change risks
Pressure on banks to meet net zero goals could inadvertently benefit Chinese lenders by granting them a larger share of global energy projects, according to sources.
European banks are reluctant to provide funding for fossil fuel projects worldwide due to concerns about potential regulatory repercussions.
Even after the UK’s departure from the EU, British banks are unlikely to fill this financing gap as they are also focused on addressing climate change.
Taking advantage: A banking source said Chinese banks are the most likely to gain if Europeans banks stop energy lending in the developing world
Ana Botin, CEO of Spanish-based bank Santander, the largest lender in Latin America, raised concerns at an international conference in Marrakech, Morocco. She stated that her bank is facing pressure to refrain from investing in an Argentinian shale gas field, despite the country’s long-term energy needs.
‘It’s a huge opportunity for Argentina,’ Botin said at the Institute of International Finance meeting. ‘However, when European banks are discouraged or pressured, it restricts access to financing these types of developments.
‘The same situation exists in many African countries where either European banks are absent or unwilling to venture.’
While investment in environmentally friendly projects is important, Botin noted that there is a greater demand for funding in traditional energy sectors, such as the Argentinian project.
A senior banking source in the UK described regulators’ approach as having a negative impact on such investments.
Last year, the European Central Bank warned that failure to address climate change risks would result in higher capital requirements and potential fines.
The ECB stated, ‘Deadlines will be closely monitored and, if necessary, enforcement action will be taken.’
While the UK has the freedom to diverge from EU rules after its departure, recent financial services legislation incorporates net zero goals. Despite efforts by Rishi Sunak to slow down the transition, these goals will still be upheld.
Since 2021, the Bank of England has been mandated to ‘support the transition to a net zero emissions economy’.
Without changes to these mandates, British banks may struggle to capitalize on European banks’ hesitance to invest in oil and gas projects, said
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