Banks Backing Green Steel Fund ‘False Solutions,’ Report Says

Article content(Bloomberg) — Almost all major banks that have pledged to finance low-carbon steel are backing initiatives that will lead to additional greenhouse gas pollution.Sign In or Create an AccountEmail AddressContinueor View more offersArticle contentAn analysis published Wednesday by nonprofit BankTrack found that all but one of 20 top lenders — Lloyds Banking Group Plc being the exception — are funding companies or projects pursuing what the Netherlands-based group calls “false solutions.” These include approaches such as reducing iron ore by using natural gas or injecting hydrogen into blast furnaces, which BankTrack said risk prolonging carbon-intensive processes or driving deforestation.Article contentWe apologize, but this video has failed to load.Try refreshing your browser, ortap here to see other videos from our team.Article contentArticle contentThe steel industry is a major source of carbon emissions, with conventional steelmaking belching carbon dioxide twice: first when coal is heated to create coke, then again when the coke is burned to melt iron ore in furnaces. And with global demand for steel growing, the race is on to develop “green steel,” with companies exploring a plethora of newer, cleaner manufacturing techniques.Article contentTop StoriesGet the latest headlines, breaking news and columns.There was an error, please provide a valid email address.Sign UpBy signing up you consent to receive the above newsletter from Postmedia Network Inc.Thanks for signing up!A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.Article content“Because steel accounts for 11% of emissions, it’s critical that the sector transitions, and it needs capital to do so,” Julia Hovenier, the report’s co-author and banks and steel lead at BankTrack, said in an interview. “But it’s not only the volume of capital, but also the quality that determines whether the sector transitions.”Article contentCutting emissions in the steel sector to align with the Paris Agreement comes with a hefty price tag of as much as $335 billion by 2050, according to the Mission Possible Partnership. Between 2016 and mid-2023, 354 banks provided $429 billion to the 100 biggest steel producers, suggesting that finding capital isn’t the main challenge.Article contentDespite banks’ role as major creditors and underwriters, only 7% of total steel-sector financing was earmarked for green or transition activities between 2019 and mid-2024. And only seven of the 20 banks assessed by BankTrack have explicit sustainable-finance frameworks for steel decarbonization that define which projects and technologies qualify under emissions-reduction standards.Article contentArticle contentBankTrack has developed its own taxonomy to distinguish between what it considers “real” and “false” solutions for decarbonizing steel. “There are good ways and bad ways to decarbonize,” Hovenier said, adding that some methods marketed as green create “a serious risk of greenwashing for banks and steel clients.” Article contentTechnologies and approaches that best support decarbonization include electric-arc furnaces powered by renewable energy and the use of green hydrogen to process iron ore in so-called direct reduction furnaces, according to BankTrack.Article contentEighteen banks assessed in the report include electric furnaces in their sustainable-finance frameworks.Article contentBankTrack’s list of “false” solutions includes direct reduced iron made using fossil gas, which is less carbon intensive than burning coal but used to justify the development of new gas fields and infrastructure. The nonprofit also criticized the widespread use of carbon capture, utilization and storage, saying the technology has yet to be proven at commercial scale and risks a “global fossil lock-in.”Article contentThe banks “most aligned” with BankTrack’s definition of real solutions for steel decarbonization were Lloyds, Barclays Plc and Societe Generale SA, according to the report.Article contentTrending John Manley: Why Canada needs to play it cool on CUSMA — and keep its options open Economy The problem of the Toys 'R' Us $36-million gift card mountain Retail & Marketing BlackBerry cofounder Michael Lazaridis invests in Vancouver-based AI startup Innovation 'Escape hatches are gone': Power of sale listings surge in Toronto Real Estate As Cuba fuel crisis deepens, Canadians on the ground remain in vacation mode News Share this article in your social networkCommentsYou must be logged in to join the discussion or read more comments.Create an AccountSign in Join the Conversation Postmedia is committed to maintaining a lively but civil forum for discussion. 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