Santander challenged on TCFD alignment over financing of fossil fuels

Civil society groups take issue at AGM of Spanish banking giant

Environmental, social and governance advocates have raised concerns at the AGM of Spanish banking giant Santander over its consistency with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) as they say the bank continues to finance fossil fuel projects.

The questioning was led by the Madrid-based Instituto Internacional de Derecho y Medio Ambiente (International Institute for Law and the Environment, or IIDMA), in cooperation with ShareAction, BankTrack and Polish group DY-OPMN.

IIDMA is an environmental law firm, similar to the UK-based ClientEarth.

IIDMA Director Ana Barreira told RI that Santander provides shareholders with information about its financial support for renewable energy but not so much about its fossil fuel financing, particularly in Poland.

According to BankTrack, Santander is part of a consortium of banks that in September 2018 lent €950m to the Polish high-emitting utility group PGE which owns the coal-fired Bełchatów Power Plant, one of the largest in the world.

BankTrack denounced the fact that that PGE has an €8 billion investment program for the next five years, of which two thirds will be used to extend the lifespan of existing coal plants and build new ones.

Barreira took issue with the way Santander is reporting climate-related financial risks, as required by the new Spanish Law 11/2018 enacted last December to transpose the EU Non-Financial Reporting Directive, as well as the TCFD recommendations.

“I asked Ana Botín [Santander’s Executive Chair] how climate risks are being measured when exposed to financing such coal projects. The answer was that they measure their carbon footprint. However, what really matters is their activity as a financial services provider.”

Barreira said this is a sign of the usual confusion between sustainability reports and the new non-financial information statements, which should be part of the management report and include an analysis of environmental and climate risks.

In December 2018 Santander issued new coal policies committing to ending direct financing of mining and power projects worldwide – but not of existing clients such as PGE.Another study by BankTrack found that more than 90% of coal financial flows come via indirect financing.

Data from the Coal Exit Project showed that in the last three years Santander has provided more than $1.6bn in financing for six major companies actively developing new coal plants globally.

Asked about this policy, Santander’s Botín answered that the bank cannot abandon existing clients in their energy transition but rather support them in such a process.

Barreira’s questions, on behalf of IIDMA and ShareAction, came on the back of the non-financial information statement, which as required by Law 11/2018, must be put to a shareholder vote as a separate agenda point in the AGM from this season onwards.

In that respect, trade union Comisiones Obreras (CCOO) has issued voting recommendations against Santander’s non-financial information statement.

The recommendations are aimed at union representatives who are trustees of corporate pension plans (CCOO also runs a small €11m pension plan for union members which is a PRI signatory).

CCOO’s voting advice is more focused on social and governance issues such as remuneration or collective bargaining agreements rather than climate risks.

According to CCOO Economist Mario Sánchez Richter, the reason for recommending a vote against is the lack of granularity and detail on Santander’s non-financial reporting.

Interestingly, CCOO’s voting report also took issue with Santander’s corporate tax reporting, which it expected to be broken down country by country, also a demand from tax justice campaigners from different organisations.

IIDMA also partnered with Fiare Banca Ética, the Spanish member of the new Shareholders for Change investor network, to challenge utilities firm Endesa at its AGM, seeking a deadline no later than 2025 for the closure of its coal plants.

In addition, IIDMA will attend the May 16 AGM of Italian utility group Enel, which has a 70% stake in Endesa. This is now the third year of IIDMA’s AGM activity.