US bank becomes the first to establish a no-go zone in the oil and gas sector

Goldman Sachs has ruled out future financing of oil drilling or exploration in the Arctic and said it would not invest in new thermal coal mines anywhere in the world.

The new environmental policy, which was released by the US bank on Sunday, was praised by environmentalists, though many warned that it was only a first step.

In its statement, Goldman Sachs also “acknowledged” the scientific consensus on the climate crisis, which it said was one of the “most significant environmental challenges of the 21st century” and said it planned to more effectively help its client manage climate impacts, including through the sale of weather-related catastrophe bonds.

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Jason Opeña Disterhoft, a climate and energy campaigner at Rainforest Action Network (RAN), which helped to lobby for the change, said the decision to rule out direct financing for Arctic exploration made Goldman the first US bank to establish a “no-go” zone in the oil and gas sector.

“Goldman Sachs’s updated policy shows that US banks can draw red lines on oil and gas, and now other major US banks, especially JPMorgan Chase – the world’s worst banker of fossil fuels by a wide margin – must improve on what Goldman has done,” he said.

If other banks followed suit, he added, coal financing would become “unbankable”.

An investigation by the Guardian earlier this year found that the world’s largest investment banks had provided about $700bn in financing for the most aggressive fossil fuel companies since the signing of the Paris climate agreement. That financing was led by JP Morgan Chase, which has provided $75bn to companies expanding fracking operations and Arctic oil and gas exploration since 2016.

RAN and other activists, including veteran Bill McKibben, singled out the “tireless Indigenous-led resistance for pressing Goldman Sachs to make the change, including the Gwich’in Steering Committee, which represents more than a dozen indigenous Gwich’in communities in Alaska and Canada.

The new policy was seen as an important development in part because, environmentalists said, the US had been lagging behind European peers and Asian banks that have been making the most rapid progress in addressing the climate crisis.

Even as Goldman Sachs won some praise, however, it is clear that the company was not fully committed to backing away from its involvement in the oil and gas sector. The bank reportedly lobbied aggressively last summer to win a seat at the table ahead of the initial public offering of Saudi Aramco, the world’s worst state-owned polluter.

Recent reporting on the IPO indicated that Goldman Sachs, among other banks, was likely to miss out on an anticipated fee “bonanza” after the size of the offering was scaled back. Citing people with knowledge of the matter, Bloomberg News recently reported that Goldman Sachs was among the banks that were expected to make less than it had anticipated after foreign investors opted not to participate in the share sale.

While Goldman Sachs suggested that its motive in refraining from Arctic drilling was an environmental one, it was not the first time the bank has suggested it was opposed to the idea. In 2017, one of the bank’s natural resource experts said that the allure of tapping the Arctic for new resources had been “dispelled” by the other “enormous cheap, easier to produce and quicker time-to-market resources in the Permian onshore US” resources, referring to western Texas and southeastern New Mexico.

Michele Della Vigna, head of energy industry research at Goldman Sachs, said in 2017: “We think there is almost no rationale for Arctic exploration … Immensely complex, expensive projects like the Arctic we think can move too high on the cost curve to be economically doable.”

The move on Sunday nevertheless won plaudits from the Sierra Club, among others, which said it had met with Goldman Sachs representatives and other major banks in recent months, along with the Gwich’in Steering Committee, to discuss the dangers of Arctic drilling.

“The Trump administration may not care about ignoring the will of the American people or trampling Indigenous rights, but a growing number of major financial institutions are making it clear that they do,” said Ben Cushing, a Sierra Club campaign representative. “We hope other American banks will follow their lead.”