View from the top: Abel Martins-Alexandre

Please explain Lloyds’ strategy to support and invest in the world’s energy industry.

Climate change is one of the biggest challenges of our times, and it requires us all to rethink our energy sources, the conversion and generation of energy and electricity, its transmission and distribution, and our consumption.

This requires moving away from fossil fuels and, more fundamentally, a retrofit of the entire energy system. We are very focused on playing our part and our strategy is clear and consistent:

• No financing of thermal coal
• No direct financing of new greenfield gas and oil projects
• Support our clients with decarbonisation activities
• Actively support renewable energy and transition technologies.

This is underpinned by our active engagement with clients regarding their credible transition plans and by our Net Zero Banking Alliance (NZBA) commitments, which are all science-based.

Do you regard specific energy sectors as providing higher returns and lower risks than others? For instance, how do you rate oil and gas projects versus offshore wind projects?

Our external sector statements are clear: we don’t finance new greenfield oil and gas projects.

We set clear expectations for clients to establish credible transition plans, which include reviewing the capital expenditure allocated to decarbonisation activities, renewables and transition technologies.

For any financing and investing activity, we consider returns and risks, as well as environmental, social and governance and sustainability factors, including compliance with our NZBA commitments. We are not interested in returns that are not sustainable and do not have a real economic and environmental impact.

We believe short-term returns should not be generated to the detriment of medium and long-term sustainability and value creation. The business risk of not transitioning to renewable energy sources is high and may not necessarily be fully recognised. We are working hard to embed tools that provide us with the right credit and pricing decisions that include sustainability factors.

Our external sector statements are clear: we don’t finance new greenfield oil and gas projects

Policy mechanisms are often essential to support renewable and transition technologies. They provide the proper risk allocation, certainty of minimum returns, and de-bottleneck planning or supply chain issues that may hinder returns.

About

Abel Martins-Alexandre

Abel Martins-Alexandre is Managing Director and Head of Infrastructure, Energy and Industrials in Corporate & Institutional Banking, Lloyds Banking Group, which he joined in October 2021.

Mr Martins-Alexandre leads a team of experienced coverage bankers across three main industry pillars: Infrastructure & Transport, Manufacturing & Industrials, and Energy, Commodities & Utilities. Prior to Lloyds, he spent 15 years in the diversified metals and mining group Rio Tinto, where he held a range of strategy, business development, restructuring and finance roles, including Group Treasurer.

How is Lloyds Banking Group ensuring that energy financing is inclusive, reaching a diverse range of projects and stakeholders, including those in emerging markets?

Our purpose – Helping Britain Prosper – is key to everything we do. We help Britain prosper by creating a more sustainable and inclusive future for people and businesses, shaping finance as a force for good. This is embedded in our values, processes and decision-making across our entire business.

Supporting the transition to a low-carbon economy and contributing to a just transition is an essential part of our business:

• Reduce carbon emissions we finance by more than 50% by 2030, on the path to net zero by 2050 or sooner
• Net-zero own operations by 2030
• Sustainability outcomes embedded across business priorities.

How is Lloyds Banking Group measuring the impact of its global energy financing initiatives in terms of environmental and social outcomes, and are any specific metrics or benchmarks being used?

We measure our financed emissions against our board-approved targets, and our key performance indicators are aligned with these and other sustainability measures to assess the performance and remuneration of group executive committee members.

Our comprehensive sustainability reports outline the specific measures regarding our financing activities across businesses and how we strive to do them sustainably and inclusively.

Our purpose – Helping Britain Prosper – is key to everything we do. We help Britain prosper by creating a more sustainable and inclusive future for people and businesses, shaping finance as a force for good

Does Lloyds collaborate with other financial institutions, industry players, or international organisations to address challenges and drive positive changes in the global energy sector?

We are members of strategic working groups for the Transition Plan Taskforce, and we are exploring and contributing to the future of transition plan disclosure in the UK.

We also recently partnered with the University of Edinburgh to deliver a bespoke training programme for 173 commercial banking colleagues on low-carbon transition technologies, including carbon capture, utilisation and storage, and hydrogen.

We are working group members of the World Economic Forum’s Financing the Transition to a Net-Zero Future initiative. This global initiative focuses on low-carbon technologies and the risks and opportunities they present. Members include US and UK government departments, as well as many different technology producers, banks, and supply chain stakeholders.

Finally, we are an NZBA Founding Member.

Image credit | Alamy