Initiative Focuses on Overlooked Bond Market as Source of Funding to Bolster Coal, Oil and Gas

LONDON – The Toxic Bonds initiative launched today reveals its list of the top 30 corporations using the bond market to obtain cash to expand coal, oil and gas operations despite repeated warnings from the IPCC, IEA and others that the world must urgently move away from fossil fuels. Altogether, the “Dirty 30” – a list that includes some of the most well-known fossil fuel companies worldwide such as Exxon, TotalEnergies, Shell, BP, Chevron, Saudi Aramco, and Adani – currently have more than $491 billion [1]— nearly half a trillion – in total EU/USD bonds that are outstanding.

The Dirty 30 was covered exclusively today in Bloomberg.

The Toxic Bonds initiative brings together civil society organisations from across the world including SumOfUs, Urgewald, Solutions For Our Climate, Reclaim Finance, AnsvarligFremtid, Both ENDS and The Sunrise Project. 

“As bank lending for coal has tightened, the bond market remains a safe haven for fossil fuel companies to fund expansion. Dirty energy companies are using the corporate bond market as the back door to secure large amounts of cash for expansion projects.  This has so far received too little scrutiny,” said Nick Haines, SumofUs. “The Toxic Bonds initiative seeks to bring advocates together to knock out bonds as a pillar of support for fossil fuel expansion.” 

Since the Paris climate talks in 2015, $2 trillion oil and gas bonds have been issued. That’s half of the total in circulation. More than $600 billion is set to mature after 2030, according to Greenwatch.[2]

Coal companies with the biggest expansion plans raise 2.5x more capital through bond issuance than through bank loans, and bonds have become the single largest source of financial support for coal in China and India, according to Sunrise Project analysis of the Global Coal Exit List and data from company financial statements.

The global bond market is significantly bigger than the equities market, but the vast amounts being raised on the bond market for coal, oil and gas expansion are often overlooked in efforts to shift global finance beyond fossil fuels. 

“This oversight is particularly relevant during this year’s AGM season, as resolutions are being placed on banks and fossil fuel companies by shareholders,” said Haines. “At a time when investors are holding financial institutions to account, it is important they don’t forget about debt being raised via the bond market.”

Among the Dirty 30, Adani, Exxon, TotalEnergies and the Korea Electric Power Corporation (KEPCO) are noteworthy given their large expansion plans and/or reputational risks.

Adani has over $8 billion USD/EUR bonds outstanding, and is building the largest coal mine in Australia's history. The Adani Group’s history shows that it operates as a single entity shifting money within the group as needed, and as such, any financing or investment in any Adani Group company frees up capital that could be used to fund the Carmichael mine and its associated infrastructure.

"Despite the urgency of the climate crisis the Adani Group is planning to double its coal-burning power capacity and either own or operate several new thermal coal mines, including the disastrous Carmichael coal project in Australia,” said Pablo Brait, Campaigner with Market Forces. “The Carmichael mine is being ‘self-funded’ by Adani, mainly via inter-company loans. So while banks and other financiers may refuse to fund projects such as Carmichael directly, the significant amounts they help Adani raise via bond issues are freeing up the capital which could then flow to Adani's new fossil fuel projects."

According to the Dirty 30 list:

• ExxonMobil has over $41 billion in USD/EUR bonds outstanding. ExxonMobil’s short term upstream expansion plans amount to 7 billion barrels of oil equivalent (bboe), making it one of the biggest developers of new oil and gas in the world. ExxonMobil is also one of the top ten companies with the highest annual capital expenditures on oil and gas exploration[3]. The company’s projections used for its business planning show a 2050 future where fossil fuels still provide over 70% of primary energy, reflecting that Exxon’s core business model is still highly reliant on the release of CO2 into the atmosphere.

• TotalEnergies has USD/EUR bonds worth nearly $50 billion that are outstanding. Buying TotalEnergies’ new bonds was recently denounced, as the French oil and gas major’s current climate strategy does not prevent it from implementing fossil fuel expansion plans: More than 70% of TotalEnergies’ capital expenditures will be dedicated to fossil fuels, including €2.6 to €3.2 billion per year for new projects.

• The Korea Electric Power Corporation, also known as KEPCO, has $2.3 billion USD/EUR bonds outstanding according to the toxic bonds list [4]. KEPCO is reported to have already issued $8 billion USD worth of corporate bonds in Q1 2022; a figure that includes both domestic and international bonds. This colossal amount is close to the company’s total bond issuance in 2021 and three times the $2.5 billion issued in 2020. If KEPCO’s bond issuance trend continues, the amount the company raises via the bond market is expected to reach $32.8 billion this year. KEPCO is still developing new coal-fired power plants in South Korea, Vietnam and Indonesia. Although the company announced a coal-power phase out by 2050, global coal phase-out should take place by 2040 .

"KEPCO has continued to issue bonds to finance coal power projects. Not only does this exacerbate the climate crisis, but it also exposes the company to highly volatile coal assets which are quickly becoming stranded," said Joojin Kim, Managing Director at a Seoul-based climate group, Solutions for Our Climate. "The company’s continued bond issuance is unsustainable, and it needs more than a band-aid for its environmental and financial challenges."

“Every time investors buy new debt from the Dirty 30 they are helping to drill new oil wells or open new coal mines,” said Haines. “We can no longer afford to dismiss the bond market when taking on fossil fuel expansion.

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Toxic Bonds is a network of civil society organisations working together to secure a climate-safe future for everyone. We exist to draw attention to the role the bond market plays in fuelling the climate crisis, and to help all market players transition their businesses away from climate destructive investments.

References:\

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1. $491,769,445,981 is the total placement amount in USD as of February 2022 for outstanding EUR/USD bonds only, and does not cover bonds issued in local currencies. To determine this number, EUR bond placements were converted to a USD value using the conversion rate of $1.0538 on May 4, 2022. All EUR bond values are converted throughout this release on the same basis. The companies were compiled using data obtained from the Global Coal Exit List (GCEL) and Global Oil and Gas Exit List (GOGEL) and publicly available sources, the data on USD/EUR bond issuances was gathered via various market platforms that collate corporate bond information.

2. GreenWatch Team: Andreas Hoepner, Matthew McQuade and Fabiola Schneider. Data collected 23 February - 23 March 2022 https://www.greenwatch.ai/

3. https://gogel.org/sites/default/files/2021-11/GOGEL%20Media%20Briefing.pdf 

4. This figure is USD bonds of the parent company KEPCO, it does not include bonds issued by KEPCO’s subsidiaries or bonds issued on the domestic market.