Macquarie Group has been singled out for greenwashing in a new report that claims the investment bank has financed $5 billion in oil and gas industry projects either as direct loans or as equity investments through its extensive network of managed funds.
However, the bank only discloses $1.2 billion of these investments in its Net Zero and Climate Risk report, according to an Institute of Energy Economics and Financial Analysis report. It only discloses on balance sheet financing, which does not include investments made through Macquarie Asset Management portfolio companies.
“Macquarie Group’s disclosure on financed emissions appears to be exploiting a loophole in the NZBA guidelines, which do not mandate member banks to establish targets for their fossil fuel exposure through off-balance sheet activities,” IEEFA chief executive Amandine Denis-Ryan said.
The investment bank positions itself as a leading player in the energy transition with $32 billion invested in 107 GW of renewable energy in the past five years. It has recently signed on to two Net Zero alliances, the Glasgow Financial Alliance for Net Zero (GFANZ) and the Net Zero Banking Alliance.
Yet the investment bank maintains a sizeable exposure to fossil fuel industries and has made several new investments in the past two years.
Since 2022, the company has taken a five per cent stake in ASX-listed Beach Energy, provided $15 million in finance to Empire Energy for the Beetaloo Basin gas project and contributed to the issuance of a $3 billion loan for US energy giant Southwestern Energy.
Southwestern plans to increase its oil and gas extraction activities by over 1500 million barrels of oil equivalent, which would result in the emission of 494 MtCO2e, which is more than Australia’s total 2021 emissions of 465 MtCO2e.
Macquarie Group has shares and bonds in 11 of the world’s largest oil and gas majors worth a combined $3 billion. All these companies are planning short-term expansions in their oil and gas extraction activities, the IEEFA report noted.
Macquarie Group had not replied to a request for comment by the time of publication.
Is Macquarie fudging its emissions reporting?
The IEEFA report also took aim at the bank’s methodology for reporting its emissions, for which it uses an emissions intensity target rather than an absolute reduction target.
This is despite a recommendation from the Taskforce on Climate-Related Financial Disclosures for oil and gas companies to use absolute targets. IEEFA argued that Macquarie’s use of an emissions factor would allow it to increase its investments in gas projects rather than oil while still reporting a reduction in emissions because the carbon intensity of those emissions would be reduced.
“[The target] does not require the group to achieve any reductions in the volume of fossil fuel production financed and its associated emissions,” the IEEFA report stated.
The big four Australian banks all use absolute emissions reduction targets and disclose the exact amount of finance they provide via syndicated loans to oil and gas companies. Commonwealth Bank of Australia reported $2.1 billion in its most recent financial year, while NAB lent $1.9 billion and Westpac financed $1.9 billion of projects in the sector. ANZ only discloses its exposure to the full oil and gas value chain, which is $16.1 billion.
Macquarie has participated in syndicate loans for oil and gas exploration to the tune of $4.3 billion since 2021 but does not disclose the proportion of the loans that it provides.
IEA says no to new oil and gas drilling
IEEFA argued that the investment bank’s emissions reduction efforts are incompatible with the goal of the Paris Agreement to reduce global temperature rises to within 1.5 degrees Celsius of pre-industrial averages.
The International Energy Agency has stated that its Net Zero by 2050 scenario cannot be achieved if new oil and gas extraction activities are permitted. “Beyond projects already committed as of 2021, there are no new oil and gasfields approved for development in our pathway,” the IEA report stated.
Continuing to invest in the oil and gas sector is not in Macquarie shareholders’ interest, because these companies typically underperform compared to other sectors of the economy, IEEFA pointed out.
Regional oil and gas indices such as the Dow Jones US O&G index, S&P Global Oil Index and the S&P Commodity Producers Oil & Gas Exploration & Production Index) have materially underperformed the market benchmark (S&P Global 1200) over one, five and 10-year time horizons.
Moreover, the IEA is forecasting an oversupply in LNG markets in its Global LNG Outlook for 2023-2027. The 64 million metric tonnes of annual liquefaction capacity set to come online by 2026 is likely to produce a multiyear supply glut which will pressure margins and profits for LNG exporters for years to come, the IEEFA report stated.