A new report by the Sierra Club, a national environmental advocacy organization, detailed how the country’s largest financial management companies are using pension funds, retirement and other savings to fund fossil fuel projects like LNG plants along the Texas coast — despite commitments to reducing emissions.
Asset management companies including BlackRock, Invesco, Vanguard and JPMorgan and others are using bonds to finance fossil fuel projects, such as Rio Grande LNG, despite committing to net-zero carbon emissions, according to the report.
The information coincided with news last week that JPMorgan & Chase left climate impact commitment group Climate Action 100+. BlackRock left the group as well and transferred its membership to its international arm. Vanguard left a climate impact commitment group called the Net Zero Asset Managers initiative in 2022.
The Sierra Club report listed several fossil fuel projects in the U.S., including oil drilling projects in the Permian Basin in Texas, the Mountain Valley Pipeline, BP oil drilling projects in the Gulf of Mexico and the Willow Project in Alaska, being financed by bonds purchased from companies such as ConocoPhillips, BP, EQT Corporation, TotalEnergies, and Pioneer Natural Resources. The asset management companies have spent $1.6 billion in bonds for fossil fuel projects in the last year and a half.
In the last 20 years, financing for fossil fuel projects has increasingly come from bonds purchased by asset management companies rather than loans. The diversion in funding sources coincides with hundreds of these companies acknowledging climate change, signing onto a commitment to work with their clients, some of which are oil and gas companies, to reduce greenhouse gas emissions by 2050.
The initial push for committing to net zero emissions came from the Paris Agreement of 2015. But the Sierra Club report detailed that asset management companies continued fueling billions of dollars into fossil fuel projects before withdrawing their commitments, some of which use funding from pension and retirement plans.
“If you have an IRA, a 401K, a pension fund, or if you just have any savings that you've put into the stock market, it's possible that money is being invested by these large institutions and these fossil fuel companies,” Jessye Waxman, senior campaign strategist for the Sierra Club and author of the report, explained to TPR.
When it comes to liquefied natural gas (LNG) projects, the report said the banks that help asset management companies facilitate bond purchases do not have restrictions on financing them. Citing an article from the Guardian newspaper, the report noted that banks issued loans and facilitated bonds worth $110 billion, which funded much of the construction for LNG terminals along the Gulf Coast.
BlackRock, which manages retirement and savings funds for state and federal employees, recently announced it was purchasing Global Infrastructure Partners, a majority shareholder in the Rio Grande LNG project currently being constructed outside Port Isabel, Texas, for $12.5 billion.
BlackRock has also purchased $70 million in bonds from TotalEnergies, a French energy company Rio Grande LNG is contracted to sell LNG to once it begins operating. The report noted that though these bonds are not specifically funding the Rio Grande LNG and other LNG projects along the Gulf Coast, the money has “been critical to helping Total [Energies] to build out or plan for expansions at plants.”
“When asset managers continue to purchase newly issued bonds, it tells fossil fuel companies that investors approve of their current plans and support a longer future for fossil fuels, which enables companies to continue expanding unsustainably instead of prioritizing decarbonization and phasing out fossil fuels,” the report’s conclusions read.
Rio Grande LNG is one of 31 planned oil and gas projects along the Gulf Coast. The South Texas project started construction last year after receiving nearly $20 billion in financing, with crews clearing nearly 1,000 acres of land along the Brownsville ship channel which stretches between Port Isabel and Brownsville.
Rio Grande LNG has still not received full clearance from the Federal Energy Regulatory Commission (FERC) to start constructing the machinery that will convert funneled gas to liquid form, however, as it still needs to file their cost-sharing and emergency response plans. Updates on these plans are withheld from the public.
Rio Grande LNG and Texas LNG, another gas project in the area, have been subject to intense local criticism for their potential pollution and emissions despite being favored by local officials. The projects have been sued multiple times over the years. The Carrizo Comecrudo Tribe of Texas said the Rio Grande LNG project is on the tribe’s sacred lands and has never consulted with the tribe about the project.
The Sierra Club is part of an ongoing lawsuit against FERC on both projects for what the plaintiffs said is the agency’s ignoring of a D.C. Circuit Court’s order to address the plants’ impacts on neighboring communities. While FERC denied Sierra Club’s petition, the organization, along with the City of Port Isabel, the Carrizo Comecrudo Tribe of Texas and a group of Port Isabel residents known as Vecinos para el Bienestar de la Comunidad Costera, appealed to the D.C. court again for it to stop the Rio Grande LNG project from being constructed any further until lawsuits against it are ruled on.
The Department of Energy (DOE) announced a pause on approving LNG projects last month to measure their climate impacts. In response, the House of Representatives passed a bill last week that attempted to make FERC the sole approving authority for LNG plants, which risks the DOE’s ability to measure the impact and public interest of LNG projects. The bill will likely not pass a Senate vote.
“Banks and asset managers investing in Gulf LNG facilities willfully ignore the destruction they’re funding,” Emma Guevara, a Sierra Club field organizer in Brownsville, said in a statement. “The community opposes these facilities — and Europe’s gas consumption just fell to a 10-year low so they’re not even needed. Brownsville LNG facilities are a bad investment on so many levels, and asset managers should stop making the destruction possible.”
