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For a growing number of banks, however, that does not seem to matter.
After years of legal entanglements arising from environmental messes and increased scrutiny of banks that finance the dirtiest industries, several large commercial lenders are taking a stand on industry practices that they regard as risky to their reputations and bottom lines.
In the most recent example, the banking giant Wells Fargo noted last
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The bank was a small player in the sector, representing about $78
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But the policy shift by Wells Fargo follows others over the last two
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HSBC, which is based in London, has curtailed its relationships with some producers of palm oil, which is often linked to deforestation in developing countries. The Dutch lender Rabobank has applied a nine-point checklist of conditions
In some cases, the changing policies represent an attempt to burnish green credentials in areas where the banks had little interest, and there is no indication that companies engaged in the objectionable practices cannot find financing elsewhere.
Still, banking analysts and others suggest that heated debate over climate change, water quality and other environmental considerations is forcing lenders to take a much harder — and often uncomfortable — look at where they extend credit, and to whom.
“It’s one thing if your potential borrower is dumping cyanide in a river,” said Karina Litvack, the head of governance and sustainable investment
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Environmental risk has been on the radar for lenders since the 1980s and early 1990s, when courts began forcing some measure of responsibility on banks for the polluting factories, superfund sites and other environmental problems that had, to one degree or another, been facilitated by their financing.
Congress passed a law in 1996 that limited the exposure of lenders on this front, but since then, most major banks have developed environmental risk management divisions as part of their commercial banking due diligence efforts.
Now, the rise of murkier issues like global warming, along with increasing scrutiny by environmental groups of banks’ investments in
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“We’re taking a much closer look at a much broader variety of issues, not all of which are captured under state and local laws,” said Stephanie Rico, a spokeswoman for the environmental affairs group at Wells Fargo.
Ms. Litvack, of F&C Investments, pointed to large protests last week by many climate activists outside the Royal Bank of Scotland in Edinburgh.
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The Royal Bank of Canada, meanwhile, responding to intense pressure from environmental advocates denouncing the bank’s
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Globally, banks and environmental advocates are seeking to make things easier by developing best practices and other voluntary standards. Citigroup, JPMorgan Chase and Morgan Stanley helped initiate the Carbon Principles, which aim to standardize the assessment of “carbon risks in the financing of electric power projects” in the United States. Several international financial institutions — including HSBC, Munich Re and others — have formed the Climate Principles, which aim to encourage the management of climate change “across the full range of financial products and services,” according to the compact’s Web site.
In the United States, mountaintop removal mining has become both
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The Rainforest Action Network, which has headed a campaign to highlight financial institutions with connections to the mining, said this month that the policy shifts were chipping away at the financing.
Citing Bloomberg data, for example, the group noted that Bank of
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Carol Raulston, a spokeswoman for the National Mining Association, an industry group, said that most of the
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“While some banks no longer provide financing for companies conducting surface mining, there are many who will,” Mr. Hendriksen said. “We have and will continue to replace their services with alternate bank providers with little difficulty.”
But Rebecca Tarbotton, the executive director of the Rainforest Action Network, said in a published statement that the banks’ moves nonetheless send “a clear signal that these companies have a high risk
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“Bottom line,” she added, “as access to capital becomes more constrained it will be harder for mining companies to finance the blowing up of America’s mountains.”
Fight for a Mountain Top
Source:
New York Times, "Banks Grow Wary of Environmental Risks", accessed September 1, 2010
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