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Companies receiving these loans often sent out press releases trumpeting sweeping sustainability plans and broad goals but seldom made clear which, if any, targets were binding, the investigation found.

Many that set goals for reducing carbon pollution used “intensity” of emissions rather than overall emissions. Intensity measures efficiency per unit rather than total emissions. For example, a company might highlight that it has reduced methane emissions per head of cattle while failing to note it has increased the size of the herd.

In several cases, the companies’ own documents showed that their overall emissions increased substantially even as they received SLLs linked to decarbonization.

Banks get several benefits from issuing SLLs: They lock in massive multiyear deals with major corporations and typically count these loans toward their own public targets for sustainable lending.

Proponents of these loans say they serve an important purpose. Since they are not tied to a specific green project, they allow a more diverse set of companies to use financial incentives to improve their environmental practices. This in turn produces impact at a larger scale, they say.

“In my experience the people who are structuring these loans are endeavoring to do so in a responsible manner,” said Tess Virmani, head of policy for the lending industry group Loan Syndications and Trading Association. “I don’t think that there is as much of a greenwashing risk as there is the perception of one.”

None of the banks or companies in this story would disclose specific benchmarks or financial details of their loans, many citing issues of confidentiality. Royal Bank of Canada, one of the lenders that financed the loans to Enbridge and Drax, said it follows industry practices and is vested in helping the environment.

“Royal Bank of Canada is proud to have worked with our clients in recent years to deliver innovative financial solutions including sustainable finance,” the bank said in a statement, adding that its criteria for this financing were in “alignment with widely accepted global and Canadian industry standards.”

Measuring the consequences

Drax Group, which reported more than $10 billion in revenue in 2023, brands itself as a leader in renewable energy. It received its first SLL in 2020 for $369 million, financed by more than a dozen banks including JPMorgan Chase, Barclays and Bank of America.

The loan was linked to reducing Drax’s “carbon intensity” — rather than total emissions — and its specific terms were not detailed in public documents.

In the same year, Drax was running into trouble with environmental regulators over its wood pellet plant in Gloster, a small town in rural Mississippi. State regulators fined the facility $2.5 million, one of the highest Clean Air Act penalties in Mississippi’s history, for the release of toxic chemicals called volatile organic compounds.

In July 2021, Drax finalized another SLL for $208 million backed by lenders including the Royal Bank of Canada. It took out the loan to finance its debt from acquiring Canadian pellet producer Pinnacle Renewable Energy, a deal that doubled down on its wood biomass strategy. Like its earlier loan, this one also was linked to reducing its carbon intensity.

Drax is one of dozens of companies in the wood biomass industry — which burns wood and wood waste products to produce energy — that have taken advantage of SLLs.

The Examination and Mississippi Today found that 40 companies that operate wood biomass facilities obtained more than $76 billion in SLLs between 2018 and 2023. The analysis was based on loan information from the London Stock Exchange Group and data on wood biomass facilities from the Environmental Paper Network, a global coalition of civil society organizations.

Wood biomass companies have flourished in the last decade, presenting their work as an eco-friendly alternative to fossil fuel. U.S. exports of wood pellets reached nearly 10 million metric tons in 2023, according to the U.S. Industrial Pellet Association. More than 80% of American pellets are made in the U.S. South and shipped to nations that have made some of the biggest climate promises in the world.

The industry makes the case that the forests they harvest for energy will eventually grow back and cancel out the emissions caused by burning wood, allowing them to claim massive climate benefits when replacing oil or coal.

The United Kingdom and European Union have embraced this logic, classifying wood bioenergy as renewable and carbon neutral and relying on it to meet national climate goals.

How is this possible? They don’t count emissions from burning wood.

This carbon accounting escape clause — endorsed by the United Nations Framework Convention on Climate Change — has allowed the U.K. and Europe to claim emissions cuts based on production of wood pellets at factories that pollute in America.

The U.S. has no such subsidies for wood bioenergy, but the industry is lobbying for their provision under the Inflation Reduction Act.

Most climate scientists reject the central claim that underlies this carbon accounting loophole: that trees can grow fast enough to offset emissions from burning them.

In 2021, more than 500 scientists wrote an open letter to President Joe Biden and other world leaders urging them to repudiate the “false solution” of wood biomass in climate policies and warning that “this burning of wood will increase warming for decades to centuries.”

John Sterman, a professor at the Massachusetts Institute of Technology, said Drax’s sustainability-linked loans incentivize activities that end up being more damaging to the environment. In 2018, he conducted a study that found that energy from wood biomass is more carbon-intensive than burning coal.

“Wood bioenergy is harmful and it actually makes climate change worse,” Sterman, an expert on corporate environmental practices, told The Examination. “It’s actively moving us in the wrong direction.”

Emissions intensity also does not pass muster as a way to measure climate progress, Sterman said, calling it “meaningless” to set a target that does not limit emissions overall.

“The atmosphere responds to total emissions,” he said.

Drax said the scenarios in Sterman’s study do not reflect its forestry practices.

“We strongly believe that a transition to modern bioenergy, in which biomass is sourced sustainably, is an important part of delivering a net zero world,” the company said in an emailed response to questions.

The company said in its 2023 annual report that its overall emissions were down and that it had already achieved some of its key sustainability goals, including an 89% reduction in emission intensity in its operations since 2020. Drax told The Examination that these gains were in large part due to replacing coal with “sustainably sourced biomass.”

The company didn’t credit the escape clause that allows it to ignore massive emissions from burning wood.

In August 2024, Drax accepted its largest SLL to date, renewing its 2020 loan in a deal that expanded its credit line from $369 million to $553 million.

The company announced the following month that it was considering expanding U.S. operations, investing up to $12.5 billion to build more biomass plants across the country in the next decade.

Barclays said in a statement that its criteria for sustainability-linked finance was “consistent with industry practice” and that it couldn’t comment on individual SLLs for reasons of confidentiality. The Royal Bank of Canada said the same.

JPMorgan declined to comment, and Bank of America did not respond to repeated email and telephone inquiries.

People living near these wood pellet facilities say they have more imminent concerns than climate change.

More than half a dozen Gloster residents recently told The Examination that since the Drax plant opened in 2016, they’ve noticed a bad smell coming from the factory — comparing it to rotten eggs — and that they have developed shortness of breath or asthma.

Carmella Causey, 62, said she thinks the emissions from Drax have exacerbated her health issues. She said she now needs supplemental oxygen just to make her bed.

“It’s hard to breathe,” Causey said. “I don’t know what’s going on, but there’s something in this air.”

Last September, Drax settled with Mississippi regulators for another set of alleged violations in Gloster, this time for emissions of a group of toxic chemicals called hazardous air pollutants, which the U.S. Environmental Protection Agency defines as “those known to cause cancer and other serious health impacts.” Without admitting wrongdoing, the company agreed to pay a $225,000 fine, of which $75,000 will be dedicated to installing a dust suppression screen at the plant.

Krystal Martin, a community leader in Gloster who has spearheaded opposition to Drax, said the screen is a decade too late.

“Dust is already in our lungs. It’s already in our bloodstream,” Martin said.

Researchers at Brown University have announced a $5.8 million grant from the National Institute of Environmental Health Sciences to study what is making people in Gloster sick and whether pollution from Drax’s facility is responsible.

Drax said it commissioned an air quality analysis by an environmental consulting firm in 2023 that found “no adverse impacts to human health,” adding that it is committed to high standards of environmental and safety compliance. “Drax has partnered with state regulators to establish environmental best practices,” the company said. It did not provide its air quality analysis to The Examination.

‘Totally dishonest’

Jointly created by banks and companies in 2017, sustainability-linked loans face little oversight. The contracts are private. The closest to a formal standard is a set of voluntary principles for SLLs developed by loan industry groups, which call for sustainability targets to be ambitious, to address borrowers’ core business activities and for compliance to be verified by outside reviewers.

In several countries where SLLs have surged in popularity, regulators and investors have spoken out about loans they said were being misused.

In June 2023, the U.K.’s Financial Conduct Authority released a blunt open letter highlighting its “market integrity concerns” about SLLs, including “weak incentives, potential conflicts of interest, and suggestions of low ambition” in sustainability targets.

“We also noted a general sentiment among banks that the ‘relationship’ may matter more than the borrower’s sustainability credentials,” the agency added.

At the start of last year, a shareholder activist group in Canada filed a complaint calling on banking regulators to investigate whether the country’s five biggest banks had misled investors about their sustainable finance activities. The complaint cited SLLs to oil and mining companies that it said would actually lead to increased carbon emissions.

In May, the investment manager for the United Methodist Church — which had invested with Barclays — blasted the bank for financing “totally dishonest” SLLs to fossil fuel companies, The Bureau of Investigative Journalism reported.

In an email, Barclays said that the Bureau story overestimated how much money in sustainable finance it provided to fossil fuel companies, and that as of last February, it no longer funds energy companies for new oil and gas fields.

The Canadian Bankers Association said in a statement that its members help clients pursue sustainable finance and that each bank is responsible for defining its own eligibility criteria.

Independent research suggests that greenwashing in SLLs is widespread.

A 2023 study of more than a thousand SLLs showed that, on average, companies’ environmental ratings from outside reviewers went down in the years after they obtained the loans. That was especially true for companies that didn’t disclose their sustainability targets and benchmarks, the study found.

This pattern is “a pretty strong indication that there must be some greenwashing going on,” said Sehoon Kim, a finance professor at the University of Florida who conducted the research.

A July 2024 report by Moody’s Ratings, one of the biggest credit rating agencies, also found SLLs to be less effective in boosting sustainability than other types of loans. Moody’s found that only 42% of SLLs that it had rated received high sustainability quality scores. In contrast, 88% of loans used directly for green projects scored highly.

For the first time since their inception, global volumes of SLLs declined significantly in 2023, slumping to $457 billion from $561 billion in 2022. The downturn came as the market faced a backlash against environmentally conscious investing as well as the growing concerns about greenwashing.

In the last year, prominent companies including Mercedes-Benz and steel giant ArcelorMittal have dropped sustainability provisions from their loans, Bloomberg reported in December. In recent months, leading American banks including JPMorgan, Citibank and Wells Fargo have withdrawn from a global alliance of lenders that had agreed to pursue net-zero carbon emissions.

Virmani, of the lending industry association, said skepticism about SLLs and the complicated political attitude toward sustainability means even well-intentioned companies are now thinking twice about these loans out of concern they will be accused of greenwashing.

“There has been a pullback in companies’ desire to do these loans because of that fear,” she said.

Experts say the consequences of greenwashing in SLLs are worse than allowing big corporations to tout potentially bogus makeovers. Flawed SLLs can also take the place of funding intended for truly sustainable companies while giving banks cover to keep investing in the world’s most harmful industries.

“There are choices being made here to continue to do business as usual and add a green veneer to it,” said Brooks, of the environmental group Stand.Earth.

Pipelines and protests

In November 2020, Enbridge won permission from Minnesota to replace an aging pipeline carrying Canadian oil through the state, doubling its capacity at the time. Called Line 3, the pipeline would carry tar sands oil from Alberta. The oil is a heavy, high-sulfur product that is among the most carbon-intensive types of crude oil in the world, according to the Carnegie Endowment for International Peace’s Oil-Climate Index.

A few months later, Enbridge announced a $694 million SLL that it described as linked to environmental, social and governance goals, known as ESG, with no further details provided. At the time, the company’s overall public ESG objectives included reducing its emissions intensity — the same metric used by Drax — 35% by 2030 and increasing diversity in its board and workforce.

The loan was funded by a group of more than 20 banks including Royal Bank of Canada, Barclays, JPMorgan and Citibank.

As the pipeline advanced, Indigenous-led protesters denouncing the project’s impact on the climate and local water sources fought back, some chaining themselves in its path to block construction. In the following months, police and private security guards arrested hundreds of pipeline protesters — including 186 on one day in June alone.

In October 2021, Enbridge completed construction and reopened the Line 3 pipeline.

Now, with double the capacity, the emissions would triple to 273 million tons of carbon dioxide each year, according to a state environmental review in Minnesota. The total added emissions were equivalent to building 50 new coal-fired power plants, a Macalester College physicist calculated.

Environmentalists say that the expansion opened the door to a surge in the production of tar sands, posing an even bigger threat to the climate.

“That increased capacity has enabled new projects to go ahead,” said Keith Stewart, a senior energy strategist with Greenpeace Canada.

Yet Enbridge still announced in 2023 that it had already met one of its key climate objectives, slashing its emissions intensity by 37% in the last five years.

Enbridge’s accomplishment rests on its definitions. Not only does the target cover emissions intensity rather than actual emissions, but it includes only emissions from the company’s direct operations like its pipelines and not from burning the oil and gas that these pipelines bring to market. These direct operations make up less than 2% of total emissions from producing and burning tar sands oil, according to a company brochure, while combustion accounts for about 70%.

Enbridge’s indirect emissions, primarily from the use of its fuels, increased to nearly 55 million tons in 2023 from about 50 million tons when it received its loan two years earlier, according to its annual Sustainability Report.

The company said in written responses that it is committed to fighting climate change and that it has made “good progress” toward this goal by decreasing its absolute emissions from its direct operations by 20% since 2018. That year was marked by exceptionally high emissions and gives a rosy view of its progress despite its more recent increases in its much larger category of emissions. Enbridge said it chose 2018 as its benchmark because it was the first year its emissions data was complete after a previous merger.

“We are transparent in our reporting and disclose all emissions data annually in our Sustainability Reports — emissions intensity and actual emissions,” the company said in an email. “Both are on a downward trajectory.”

Enbridge, which reported 2023 revenues of $32 billion, said replacing the Line 3 pipeline was actually better for the environment than if it had not been rebuilt.

“If Line 3 did not exist, the products it carries would be transported by more carbon intense transportation modes,” the company said.

The Royal Bank of Canada and Barclays said in statements that their approaches to sustainable finance are consistent with industry standards, and that they do not comment on individual clients or transactions. Citibank and JPMorgan declined to comment.

Oil giant Shell obtained a $10 billion SLL — also linked to reductions in emissions intensity — in 2019. But over the next few years, during the term of the loan, it walked back several of its critical climate goals.

In 2023, it scrapped a plan to cut back its oil output in favor of cleaner energy sources. And last year, it abandoned a 2035 target for reducing emissions intensity, citing “uncertainty in the pace of change in the energy transition.”

Shell said it has met its short-term goals for reducing emissions intensity and also has targets for reducing emissions from its operations.

“Shell is committed to becoming a net-zero emissions energy business by 2050,” the company said in an email.

‘Zero deforestation’ claims questioned

Royal Golden Eagle, an Indonesian forestry conglomerate with more than $35 billion in assets, committed to a “zero deforestation” policy in 2015, and in recent years, the group has sought to remake itself as a leader in sustainability.

It has cited SLLs as one of the main elements of this identity. Since 2021, the group has secured more than $3.25 billion in SLLs, according to company documents. The loans were financed by numerous banks including Mitsubishi UFJ Financial Group, which served as sustainability adviser for two of the loans.

“This is just the beginning,” Royal Golden Eagle President Tey Wei Lin said in an article by the group in 2022 celebrating its environmental commitments. “We will be moving a significant majority of our financing towards SLLs.”

The loans to its palm oil subsidiaries Asian Agri and Apical were linked to commitments to “no deforestation,” backed by full supply-chain traceability, by the end of 2025.

But two recent reports by the environmental group Rainforest Action Network have raised questions about how dedicated the companies are to the goal.

An August 2024 analysis of satellite data by the environmental group found that deforestation continued on properties belonging to Asian Agri and suppliers of Apical after the companies received their SLLs, and even increased in 2023. In November, the group found that Apical was among several palm oil traders sourcing palm oil fruits from illegal plantations within a nature reserve in Sumatra known as the “Orangutan Capital of the World.”

Royal Golden Eagle disputed that it is responsible for recent deforestation but declined to provide The Examination with official maps or files supporting its claims, saying it would violate Indonesian law to share them. It said it acted promptly after the November report of illegally sourced palm oil fruit, and cut off the company named in the report as a supplier.

“Royal Golden Eagle firmly refutes the allegations made by the Rainforest Action Network on its agribusiness and reaffirms its strong commitment to sustainability and transparency,” a company spokesperson said in an email.

Mitsubishi UFJ Financial Group did not respond to repeated telephone and email inquiries.

Alex Helan, a senior researcher for the Rainforest Action Network, said its findings revealed “critical flaws” in the SLL market.

“There’s a baked-in incentive for the borrowers and the issuers to mutually benefit their sustainability claims without delivering any meaningful impact,” Helan said.

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To view a searchable database of the sustainability-linked loans in this analysis and a detailed methodology, click here.

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Loans provided in foreign currencies are stated in U.S. dollar values as of January 2025 exchange rates.

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Sasha Chavkin is a senior reporter for The Examination. Alex Rozier of Mississippi Today, and Marco Chown Oved and Robert Cribb of the Toronto Star contributed reporting.

Data analysis by Mago Torres, Fernanda Aguirre, and Rachel Auslander of The Examination. Alex Rozier of Mississippi Today and Kuek Ser Kuang Keng of the Pulitzer Center also contributed.

The investigative data consultancy Data Desk provided access and analysis for data from the London Stock Exchange Group.

Visual editing by Taylor Turner and Daniel Nass of The Examination. Illustrations by Alejandra Saavedra Lopez.