Challenging the Financing of LNG Export Terminals: A Call for Environmental Responsibility
Non-governmental research and campaigning organization Reclaim Finance and BankTrack have joined forces to address the environmental impact of liquefied natural gas (LNG) export terminals. In their latest report titled ‘Frozen gas, boiling planet: How bank and investor support for LNG is fueling a climate disaster,’ the organizations highlight the detrimental effects of financing these projects on the environment.
The report emphasizes that the construction of new LNG export terminals globally could result in over 10 gigatonnes of greenhouse gas emissions. Despite claims of being low-carbon, the report alleges that planned export terminals are set to contribute significantly to GHG emissions, primarily through methane leaks, posing a threat to both the environment and local populations due to high levels of air pollution.
Current State of LNG Development
The report points out that LNG development is on the rise, with projections indicating over-capacity in the sector. Major oil and gas companies like Shell, TotalEnergies, and QatarEnergy are planning to expand their operations, with 156 new LNG terminals slated for construction by 2030.
In a related study, the Institute for Energy Economics and Financial Analysis (IEEFA) raised concerns about potential oversupply in the LNG market within the next two years, citing sluggish demand growth and increasing global export capacity until 2028.
Financing the LNG Boom
The expansion of new LNG projects heavily relies on financial support from banks and investors. The report reveals that between 2021 and 2023, banks provided $213 billion for LNG expansion, while investors held over $252 billion in LNG investments as of May 2024.
Most of the financing for LNG expansion comes from a handful of international banks, with Japanese and U.S. banks leading the pack. European banks also play a significant role in funding LNG expansion projects. Notably, the top 30 banks provided 71% of all financing for LNG expansion between 2021 and 2023.
While some banks have imposed limited restrictions on project financing, none have excluded LNG developers from accessing financial support. Only a few banks, such as ING, have committed to ending financing for new LNG export terminals by 2026.
The Need for Restrictions
Despite the adoption of net-zero targets by many major banks, the report highlights the lack of specific policies targeting LNG developers. Investors in the United States, accounting for a significant portion of LNG investments, have yet to implement policies regarding LNG financing.
Reclaim Finance and BankTrack stress the urgency for banks and investors to adopt comprehensive policies that cease financial support for new LNG projects and prioritize the phasing out of financing for export terminals. The report warns that the continued funding of LNG projects could jeopardize global climate goals and hinder the transition to sustainable energy sources.
It is imperative for financial institutions to consider the long-term environmental impact of their investments and align their practices with the principles of environmental responsibility. By taking proactive steps to restrict financing for LNG projects, banks and investors can contribute to a more sustainable future for all.