There’s trouble afoot with the expansion of Kinder Morgan’s Trans Mountain Pipeline. Some 26 banks from Canada, the US, Japan, Europe and China have committed about $7.25 billion to the project that plans to expand the 1,150 kilometre route of the existing pipeline through Canada – bumping up its capacity from 300,000 to 890,000 barrels of oil a day.
It was approved by the Canadian government at the end of last year, but, in echoes of the Dakota Access Pipeline (DAPL), the project already faces 19 court challenges launched by First Nations, environmental groups and the cities of Vancouver and Burnaby.
One has to bet prime minister Justin Trudeau has upped his yoga commitment these days. Having positioned himself as a progressive, compassionate leader who welcomes Syrian refugees and bangs the drum for women, ethnic minorities and the LGBT community, he is now supporting a pipeline that impacts indigenous people and will increase the production of fossil fuels.
Protesters in Canada’s cities are reminding him of that conflict. But faced with provinces where jobs and taxes depend on the pipeline and having reviewed its environmental impact, the pipeline won.
It has left 26 banks wide open to backlash. But there is one bank that isn’t impacted at all… And that is Citi. From what I gather, Citi chief executive Mike Corbat turned down Kinder Morgan when the call came in to ask for finance support. It is just too much like DAPL, which Corbat has said he would have done differently (or not at all, one imagines) – indeed the Trans Mountain Pipeline has been dubbed ‘Standing Rock North’.
Not only is Citi sitting out of Trans Mountain, but I’m told that the reputational damage from DAPL inspired the bank to rethink its entire strategy on fossil fuels. It is the sort of thing I wish Corbat could say publicly without several of his clients cutting Citi off. The thousands that stood in freezing temperatures to protest the infringement of the rights of indigenous peoples may not have had the outcome they wanted, but it would be of comfort to know that their actions did create change.
A few years ago, it would have seemed impossible that one of the world’s largest banks would work alongside Greenpeace
It’s a two for two for Morgan Stanley, which is not in either financing; Goldman Sachs is also noticeably absent from Trans Mountain. While the big four Canadian banks are bankrolling a large portion of the project, Bank of America and JPMorgan are there on the list towards the top. If Jamie Dimon thinks he is untouchable, he may have to think again. Being top of the oil and gas league tables globally is not something one wants to shout about these days. Lloyd Blankfein would be smart to keep Goldman Sachs in second place.
Citi is not the only bank that has turned over a new leaf. HSBC, although in the Trans Mountain deal, has taken on the issue of deforestation and palm oil. In February, after receiving a petition of 200,000 names, it released a new policy saying it would no longer provide funding to companies involved in any kind of deforestation or peatland clearance. The bank also said that its clients would have to publish their own forest protection policies by the end of June.
Chief executive Stuart Gulliver even appears in a video saying how he agrees with Greenpeace and the thousands of people who had written to him about the need to protect rainforests and that Greenpeace had worked with the bank on its new policy.
In another Greenpeace-related issue in July, HSBC also forwarded evidence to the Roundtable on Sustainable Palm Oil (RSPO) that Noble Plantations was allegedly planning to clear thousands of hectares of rainforest in Papua for oil palm cultivation.
Greenpeace, which had been investigating Noble for some time, wrote to HSBC, ABN Amro, ING and Rabobank in June with the evidence. All four banks were linked to a $750 million bond deal issued by parent company Noble Group, and while the Dutch banks stayed silent, HSBC (although it didn’t formally complain) instigated the investigation.
The RSPO has now advised Noble: “To stop all further development on the concession pending full independent investigations and assessment by RSPO.”
For Greenpeace’s Jamie Woolley, it has been a defining moment. While consumer goods companies have tried to ensure that no palm oil is produced at the expense of deforestation, getting the finance companies on board has been difficult; chiefly, he says, due to sensitivity in the industry around discussing clients.
A few years ago, it would have seemed impossible that one of the world’s largest banks would work alongside Greenpeace, putting a bank client relationship at risk, or that Citi would turn down Kinder Morgan. But banks now find themselves in a world where protestors can hold up a billion-dollar pipeline to bring financial risk to the lead managers, and the negative PR impact of an environmental or human rights gaffe can end up destroying employee morale and losing customers.
It will be the quick learners that win.