UPDATE: The Japan Bank for International Cooperation (JBIC) has announced it will stop funding overseas coal power projects.
It comes just weeks after EDO’s Safe Climate team challenged Barclays and HSBC over their involvement in a JBIC fund, which is financing a new coal fired power plant in Vietnam.
Both HSBC and Barclays publicly committed to not financing new coal-fired power plants last year.
Read more below:
The Environmental Defenders Office has challenged two of the world’s largest banks over the financing of a proposed huge new coal power plant in central Vietnam.
Acting on behalf of the Sweden-based Anthropocene Fixed Income Institute (AFII), the EDO’s Safe Climate Team has challenged HSBC Holdings PLC (HSBC) and Barclays Bank PLC (Barclays), on the financing of the 2 x 600MW Vung Ang II power plant.
The banks act as underwriters for a £250 million bond issued by the Japan Bank for International Cooperation, which would contribute to a pool of money from which it appears funding for the Vietnamese coal project will be drawn. This comes less than a year after both banks publicly committed to not financing new coal-fired power plants.
In letters to the banks, the EDO’s corporate and commercial law specialists raised concerns that the promotion and issuance of the bonds entailed the following possible contraventions of legal duties:
- First, a potential contravention of the UK Financial Conduct Authority Handbook’s Principle of Integrity, given that the banks had informed their shareholders, the market, regulators and the public that they will no longer engage in the funding of coal-fired power, when it appears they may contribute to the funding of projects such as Vung Ang II.
- Second, potential contraventions of regulations prohibiting the dissemination of misleading marketing material in relation to the bond. In this regard, the material is likely to give the false impression that the proceeds of the bonds will be used for projects that would reduce greenhouse gas emissions, as opposed to coal projects. Further, the material fails to disclose the risk that fossil fuel projects such as Vung Ang II may become uneconomic as the world transitions to a low-carbon economy.
Both banks have denied the allegations.
The matter is the EDO Safe Climate Team’s latest contribution to the growing use of corporate and commercial law to hold corporations accountable for their contribution to the devastating impacts of climate change. It also represents the increasingly international nature of the team’s work, which is committed to challenging those elements of the global finance industry that are fueling the climate crisis by financing fossil fuel projects.
As noted by Thom Wetzer, Professor of Law and Finance and Director of the Oxford Sustainable Law Programme at the University of Oxford, financial institutions face increasing challenges over their climate impacts.
“Investors expect banks to make credible commitments to decarbonise their business and to stick to them. When they fail to do so, and non-legal challenges do not sufficiently change that outcome, investors appear increasingly willing to take legal action to expose and end such greenwashing.”
If you have concerns about how financial institutions are financing the climate crisis, or the transparency of their commitments in this regard, you can request free initial legal advice from the EDO by emailing us at [email protected].