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investments
Meet the Banks and Investors Funding the LNG 'Carbon Bomb'
"Banks and investors can still act to put an end to the unrestrained support they offer to the companies responsible for LNG expansion," the authors of a new report said.
Dec 05, 2024
Liquefied natural gas developers have expansion plans that could release 10 additional metric gigatons of climate pollution by 2030, and major banks and investors are enabling them to the tune of nearly $500 billion.
A new report published by Reclaim Finance on Thursday calculates that, between 2021 and 2023, 400 banks put $213 billion toward LNG expansion and 400 investors funded the buildout with $252 billion as of May 2024.
"Oil and gas companies are betting their future on LNG projects, but every single one of their planned projects puts the future of the Paris agreement in danger," Reclaim Finance campaigner Justine Duclos-Gonda said in a statement. "Banks and investors claim to be supporting oil and gas companies in the transition, but instead they are investing billions of dollars in future climate bombs."
"While banks will secure their profits, it's at the expense of frontline communities who often will not be able to get their livelihoods, health, or loved ones back."
The International Energy Agency has concluded since 2022 that no new LNG export developments are required to meet energy demand while limiting global temperatures to 1.5°C above preindustrial levels. Despite this, LNG developers have upped export capacity by 7% and import capacity by 19% in the last two years alone, according to Reclaim Finance. By the end of the decade, they are planning an additional 156 terminals: 93 for imports and 63 for exports.
Those 63 export terminals, if built, could alone release 10 metric gigatons of greenhouse gas emissions—nearly as much as all currently operating coal plants release in a year. What's more, building more LNG infrastructure undermines the green transition.
"Each new LNG project is a stumbling block to the Paris agreement and will lock in long-term dependence on fossil fuels, hampering the shift toward low-carbon economies," the report authors explained.
Many large banks have pledged to reach net-zero emissions, yet they are still financing the LNG boom. U.S. banks are especially responsible, Reclaim Finance found, funding nearly a quarter of the buildout, followed by Japanese banks at around 14%.
The top 10 banks funding LNG expansion are:
- Mitsubishi UFG Financial Group (Japan)
- JP Morgan Chase (U.S.)
- Mizuho (Japan)
- Gazprombank (Russia)
- SMBC Group (Japan)
- Bank of America (U.S.)
- Citigroup (U.S.)
- Goldman Sachs (U.S.)
- Morgan Stanley (U.S.)
- RBC (Canada)
While 26 of the banks on the report's list of top 30 LNG financiers have made 2050 net-zero commitments, none of them have adopted a policy to stop funding LNG projects. None of top 10 banks have any LNG policy at all, despite the fact that Bank of America and Morgan Stanley helped found the Net Zero Banking Alliance. Instead of winding down financing, these banks are winding it up, as LNG funding increased by 25% from 2021 to 2023. In 2023 alone, 1,453 transactions were made between banks and LNG developers.
All of this funding comes despite not only climate risks, but also the local dangers posed by LNG export terminals to frontline communities. Venture Global's Calcasieu Pass LNG, for example, has harmed health through excessive air pollution while dredging and tanker traffic has disturbed ecosystems and the livelihoods of fishers.
"Banks still financing LNG export terminals and companies are focused on short-term profits and cashing in on the situation before global LNG oversupply kicks in. On the demand side, financing LNG import terminals delays the much-needed just transition," said Rieke Butijn, a climate campaigner and researcher at BankTrack. "While banks will secure their profits, it's at the expense of frontline communities who often will not be able to get their livelihoods, health, or loved ones back. People from the U.S. Gulf South to Mozambique and the Philippines are rising up against LNG, and banks need to listen."
The report also looked at major investors in the LNG boom. Here too, the U.S. led the way, contributing 71% of the total backing.
The top 10 LNG investors are:
- BlackRock
- Vanguard
- State Street
- Fidelity Investments
- Capital Group
- GPFG
- JP Morgan Chase
- Brookfield Asset Management
- Blackstone
- MSBI
Just three of these entities—BlackRock, Vanguard, and State Street—contributed 24% of all investments.
Reclaim Finance noted that it is not too late to defuse the LNG carbon bomb.
"Nearly three-quarters of future LNG export and import capacity has yet to be constructed," the report authors wrote. "This means that banks and investors can still act to put an end to the unrestrained support they offer to the companies responsible for LNG expansion."
To this end, Reclaim Finance recommended that banks establish policies to end all financial services to new or expanding LNG facilities and to end corporate financing to companies that develop new LNG export infrastructure. Investors, meanwhile, should set an expectation that any developers in their portfolios stop expansion plans and should not make new investments in companies that continue to develop LNG export facilities. Both banks and investors should make clear to LNG import developers that they must have a plan to transition away from fossil fuels consistent with the 1.5°C goal.
"LNG is a fossil fuel, and new projects have no part to play in a sustainable transition," Duclos-Gonda said. "Banks and investors must take responsibility and stop supporting LNG developers and new terminals immediately."
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The Younger Wealthy’s Alternative Approach to Investments Doesn’t Extend to Taxation
But both the younger and older rich want to pay as little as possible in taxes on the income their investments—in whatever category—end up creating.
Aug 17, 2024
Enormously rich people tend to get bored easily, especially those on the younger side. Stocks and bonds, such a yawn. Wealthy Baby Boomers certainly do still get a kick out of watching their financial portfolios fatten. But their Millennial and Generation Z counterparts have an added expectation. The fortunes they’re investing, they’re expecting, will be filling their lives up with fun.
And what could be more fun than collecting classic cars! The ageless-auto “alternative asset class,” the Knight Frank Luxury Investment Index documents, has nearly tripled in value over the past decade. And investors in classic cars can even get to drive their investments!
Private equity fund managers, not surprisingly, are plugging themselves into this classic car frenzy. They’re doing their best to make investing in classic cars an effortless pleasure. Wealthy car collectors, thanks to their efforts, no longer need to bother checking under the hood of classic Bugattis and Ferraris. Private equity firms will arrange all that tiresome checking for them.
Billionaire and billionaire-wannabe fund execs are shelling out much more than ever before on candidates they’re counting on to keep our tax code rich people-friendly.
These private equity firms, notes auto analyst Benjamin Hunting, are buying up veritable fleets of fine autos they see as likely to appreciate strikingly over time, then offering deep pockets an opportunity to invest in these collections of classics. In return for providing this opportunity, private equity execs typically collect a 2% annual service fee and then claim 20% of the profits the sale of the cars eventually produces.
The classic car-loving investors, meanwhile, get to share the rest of the profits, on top of the joy rides some of the classic car funds invite them to take in their “alternative asset class” investment.
How secure as an investment do classic cars rate? An “elite automobile storage boutique” industry has emerged to make sure stashed-away collectible cars don’t get either scratched or stolen. One such outfit, the Vault in San Diego, uses biometric scans and personalized access cards “to guarantee that only owners, or their designated representatives, can get anywhere near luxury vehicles.”
Not all the Millennial and Gen Z super rich, of course, have taken the dive into classic car investing. Plenty of the wealthy in these age cohorts are flocking to other alternative investments, everything from fine wines and watches to sneakers and crypto. The overall “alternative asset” category, notes a new Bank of America study, has an amazing 94% of wealthy 43-and-unders interested in it.
This Bank of America Study of Wealthy Americanssurveyed 1,000 deep-pocketed adults of all ages and found that 73% of those not yet 44 years old consider themselves “skeptical” of any investment strategy that has them investing only in traditional stocks and bonds.
The wealthy who took part in the new Bank of America survey are all sitting on at least $3 million in investable assets. The younger ones among them turn out to have less than half their investable millions invested in traditional stocks and bonds. Their older counterparts have three-quarters of their investable assets in these classic categories.
The younger rich, the Bank of America study goes on to show, have almost a third of their fortunes in crypto currencies and other alternative investments like classic cars. The older rich have just 6% of their wealth sitting in these alternate asset classes.
But both the younger and older rich do share one intense investment fixation: Both age cohorts want to pay as little as possible in taxes on the income their investments—in whatever category—end up creating.
Under current federal tax law, profits from the buying and selling of assets, traditional and alternative alike, face a significantly lower tax rate than paycheck income. The top combined federal tax rate on ordinary paycheck income now runs 40.8%. But income from capital gains—the income from buying and selling assets—only faces a top 23.8% overall tax rate.
Private equity fund managers have an even lusher loophole—the so-called “carried interest tax deduction”—they will go to any lobbying lengths to forever preserve. This loophole, note analysts at Americans for Financial Reform, “allows private equity and hedge fund executives—some of the richest people in the world—to substantially lower the amount they pay in taxes.”
The loophole lets these fund execs “claim large parts” of their compensation for services rendered “as investment gains.” Ending this carried interest loophole could raise billions in new revenue.
To make sure that this ending doesn’t happen, private equity and hedge fund execs spent $547 million on political campaign contributions in the 2020 presidential election year cycle.
In the current cycle, just 11 private equity billionaires all by themselves have so far pumped over $223 million in contributions to congressional and presidential candidates, an amount that more than doubles, notes the Center for Media and Democracy, what moguls from 147 private equity firms plowed into political campaigns back in the 2016 election cycle.
In other words, billionaire and billionaire-wannabe fund execs are shelling out much more than ever before on candidates they’re counting on to keep our tax code rich people-friendly. For America’s richest, no big deal. They can easily afford these gargantuan political campaign outlays. And they also consider these outlays money exceedingly well spent.
Takes money, as the rich like to say, to make money. The American way! We need to change it. One place to start: passing the pending Carried Interest Fairness Act, legislation that U.S. Sen. Sherrod Brown (D-Ohio) has introduced to eliminate the tax loophole that only “wealthy money managers on Wall Street” could love.
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The Fossil Fuel Industry Wants to End Responsible Investing
“Anti-ESG” efforts all have one things in common—connections to conservative big money donors in the oil and gas industry.
Jul 05, 2023
In a recent Gallup poll, the vast majority of Americans surveyed said they were not even “somewhat familiar” with the term “ESG.” But on Capitol Hill, Republicans have developed a fixation on the issue, holding not one but two intensely partisan hearings on the topic.
“Republicans Are Losing Their Minds Over ESG” read one headline.
“Anti-ESG talk leads to partisan fireworks” read another.
Now you may be wondering, what the heck is ESG? What’s anti-ESG? What the heck is “woke” capitalism? And why should I care?
What Is ESG?
ESG stands for “Environmental, Social, and Governance,” which are categories of metrics that businesses use to assess performance and risk on a range of issues. To reduce risk and create value over the long term, businesses may seek to reduce carbon emissions (Environmental), improve working conditions for workers through racial equity and other measures (Social), or take steps to bring executive compensation closer in line with the company’s median salary (Governance).
Companies’ practices on ESG metrics can have an impact on future performance, so there is tremendous value in understanding long-term risks associated with environmental, social, and governance factors.
The simple concept that businesses should care about their communities and their workers and govern themselves accordingly is not new. In the 1980s, some companies and banks stopped doing business in South Africa to protest racial Apartheid. In the 1990s, a number of institutional investors divested from the tobacco industry as a way to take a stand against the harmful and deceptive practices of companies like Phillip Morris and R.J. Reynolds. And in the 2000s and 2010s, support for environmental shareholder proposals grew substantially in response to the worsening climate crisis.
Who’s Against It?
This leads us to the current backlash. “Anti-ESG” efforts, promulgated by long-time conservative organizations like the Heritage Foundation and American Legislative Exchange Council (ALEC) and newly prominent groups like the Committee to Unleash Prosperity, Consumers’ Research, and the State Financial Officers Foundation all have one things in common—connections to conservative big money donors in the oil and gas industry.
“The anti-‘woke investing’ movement was not created by financial experts,” observed environmental reporter Emily Aktin, “It was created by two of the fossil fuel industry’s most notorious climate disinformers.”
The anti-ESG movement is a well-funded and well-organized campaign led by top conservative political operatives.
Big Oil wants to end ESG investing and ESG business practices because they’re at odds with the continued growth of the fossil fuel industry. Big Oil would rather let our planet burn and increase short-term profits than adjust its business practices to stave off the worst of the climate crisis and invest in long-term profits.
Big Oil also wants you to think that this “anti-ESG” movement is organic, that it emerged from the conservative grassroots, but that could not be further from the truth. The anti-ESG movement is a well-funded and well-organized campaign led by top conservative political operatives. I recently corresponded with Meaghan Winter, author of All Politics Is Local, who explained that:
“Ideological donors and their foundations and think tanks have deliberately chosen to push their agendas through obscure-seeming front groups that work incrementally on the state level because they don’t want to call attention to the profound (and very unpopular) changes they are initiating. This strategy is decades-old, it has worked against unions and abortion and more, and the anti-ESG effort is just one of the latest incarnations.”
One shining example of this is the recent House Oversight Subcommittee hearing on ESG, where the majority witnesses (those called by the GOP, because Republicans control the House of Representatives right now) were Mandy Gunasekara from the Independent Women’s Forum, Jason Isaac from the Texas Public Policy Foundation, and Stephen Moore from the Heritage Foundation. These organizations have a long history of receiving financial support and carrying water for the oil and gas industry, including Koch Industries, ExxonMobil, and Chevron.
Watch Congresswoman Summer Lee lay it out for us, plain and simple.
Why Does This Matter?
While the right wing foments a culture war crusade and attempts to make ESG the next critical race theory (“CRT”), the fear mongering campaign has real-world impacts on investors and companies who are scared of being caught in the backlash. For example, some private companies are now backpedaling on their climate commitments.
To be clear, this is what the funders of this movement want.
In December, Vanguard, the world’s second largest asset management firm, pulled out of the Net Zero Asset Managers initiative, which was a voluntary industry-led effort to reach net-zero emission targets by 2050. This was a major setback for anyone who cares about the health and shape of our environment, because Vanguard manages roughly $7 trillion in assets. In order to meet the goals of the Paris Agreement—less than 1.5°C of global warming above pre-industrial levels—global markets must shift capital away from the fossil fuel industry and toward renewable energy systems.
But this goes beyond the climate crisis. In recent years, workers and shareholders have been demanding more corporate accountability on workplace safety, workers’ freedom of association, data privacy, racial equity, and executive compensation, among other issues that fall into the Social and Governance categories of ESG. The right-wing campaign against ESG is a campaign to roll back these victories.
How Do We Fight Back?
My organization, Take on Wall Street, is organizing with unions, public interest groups, and grassroots groups to fight back against this regressive movement. But it’s not just about playing defense. We also need a forward-looking vision for worker power, climate justice, and racial equity. Watch this space.
An earlier version of this piece was published by Take on Wall Street.
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