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    UN Names and Shames Aramco’s Banks

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    Stockholm (NordSIP) – In an unprecedented move, the United Nations (UN) has issued a written warning to Saudi Aramco and its financiers over their role in human rights violations relating to the effects of climate change.  The letter was written by a UN Working Group (WG) composed of independent human rights experts mandated by the UN Human Rights Council.  It outlines grave concerns relating to Aramco’s greenhouse gas (GHG) emissions, both in terms of historic output and estimated future increases.  The inclusion of the names of the financial institutions providing the funding for Aramco’s activities is unusual and may prove embarrassing for these companies considering their public net-zero commitments.

    Aramco’s financiers under scrutiny

    Saudi Aramco is 98.5% state owned, with some its funding provided by the country’s Public Investment Fund.  However, the UN letter also cites private sector financial institutions that have supported Aramco’s business through loans, equity holdings, financial transaction advice and facilitation, and investments in Saudi oil and gas infrastructure.  These are JP Morgan, Citi, HSBC, Sumitomo Mitsui Banking Corporation, Crédit Agricole, Morgan Stanley, BNP Paribas, Goldman Sachs, Mizuho, Société Générale and EIG Energy Partners.  The UN WG states that they are all contributing to activities that are contrary to the goals, obligations and commitments under the Paris Agreement on climate change and which are adversely impacting the promotion and protection of human rights in the context of climate change, including through Saudi Aramco’s maintained crude oil production, exploration for further oil and gas reserves, expansion into fossil fuel gas, and misrepresentation of information.

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    Saudi action directly contradicts net-zero statements

    The UN WG letter refers to the Kingdom of Saudi Arabia’s 2021 statement of intent to reach net zero GHG emissions by 2060.  Aramco has also declared its aim to achieve net-zero Scope 1 and 2 emissions within its operations by 2050.  Nevertheless, as previously reported in NordSIP, analysis by German NGO Urgewald revealed Aramco as the global fossil fuel producer with the largest expansion plans, which would overshoot the International Energy Agency’s (IEA) 2050 net-zero climate scenario by some 11.4 billion barrels of oil equivalent (BBOE).  The UN WG letter states: “Saudi Aramco considers it should be the last major oil and gas producer standing, based on its low-cost production, even as other businesses wind down their production.  This approach disregards Saudi Aramco’s own responsibility to reduce production to address its climate change-related human rights impacts.”  The letter goes on to describe Saudi Arabia and the Gulf Region’s particular vulnerability to the effects of climate change, including water stress, the rising sea level affecting vast low coastal lands, and high temperature and humidity with future levels potentially beyond adaptive capacities.  Warming levels in the region are forecast to be far greater than the global average.

    Aramco accused of greenwashing

    Aramco is also accused of a disregard for Greenhouse Gas Protocol and Task Force of Climate-related Financial Disclosures (TCFD) standards in its failure to account for Scope 3 GHG emissions, which account for the vast majority of the company’s climate impact.  The UN WG group is also highly critical of Aramco’s misrepresentation of its emissions and carbon intensity, which it claims amounts to greenwashing and has the effect of inhibiting necessary climate action.  The UN WG invited Aramco to respond to the concerns raised in its June 26 letter within 60 days.  Failure to comply would lead to its publication on UN websites accessible to the press.  This was indeed done on 25 August 2023.  The letter was also originally sent to the financial institutions concerned, as well as the governments of all the states in which they are headquartered.  These include Saudi Arabia, Japan, the US, France, and the UK.

    Although the UN WG has no direct power to sanction Aramco over the human rights violations alleged in its letter, the information can be used by other parties to take legal action.  UK-based NGO ClientEarth filed such a legal complaint against the firm in 2021 accusing Aramco of the largest ever climate-related breach of international human rights law by a business.  The UN’s “naming and shaming” of Aramco’s financial backers should also raise serious concerns with their clients and shareholders.  These companies stand accused of breaching the United Nations Guiding Principles on Business and Human Rights in relation to their dealings with Aramco.  Institutional investors will need to consider the increased reputational and financial risks for these financial institutions that may result from the UN WG letter being made public.

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