Some ESG funds include petrochemical investments, despite concerns about pollution and carbon emissions. Photo: KC Shum / Unsplash
Key points
- Major global banks have provided US$133bn in financing to fuel the expansion of the US petrochemical industry over the last six years.
- Part of the fossil fuel value chain, the petrochemical industry produces plastics and chemical fertilisers which pose financial risks, including the use of hazardous ‘forever chemicals’ that affect human health and the environment.
- However, a new report shows that $10.3bn in ESG-linked investments has gone to companies expanding their petrochemical operations. This ‘ESG washing’ highlights fundamental flaws in the rating system, which understates the full life cycle carbon emissions and broader impacts of petrochemical production.
Global banks have poured billions into the US expansion of the petrochemical industry in the past six years, even as the industry poses legal and financial risks from climate change, a new report finds.
And in some cases, retail investors have unknowingly contributed as well.
Some of the companies fueling petrochemicals are included in some ESG funds, a report from multiple organisations, including the Centre for International Environmental Law (CIEL) and Friends of the Earth, finds.
“Even in a world in which we rapidly accelerate the energy transition, the broader fossil fuel industry would like to continue using oil and gas and coal as an input to create petrochemicals, namely plastics and synthetic fertilisers,” said Brandon Marks, senior campaigner at CEIL.
But while many reports and studies have been made about the impact of fossil fuels on climate change, there has been little attention given to the petrochemical industry. Many of the reporting mechanisms and chemicals are obscure because it is often not associated with the oil industry but with the manufacturing or chemical sector.
Yet these sectors pose just as much risk as other fossil fuel industries, said Steven Feit, an attorney at CIEL.
“When you look at the increasing trend of toxic [chemicals] litigation, you see major elements for pesticides, all of which are coming from these companies,” he said.
US, Japanese, and European banks are financing petrochemical companies
In the Toxic Finance report, researchers show that banks invested US$133bn into US petrochemical companies. Citi, Bank of America, JP Morgan Chase and Mizuho alone provided one-third of that amount.
The petrochemical industry is a byproduct of the fossil fuel industry and produces plastics as well as chemical fertilisers used by many farmers. These products contain toxic chemicals such as PFAs – persistent compounds also known as ‘forever chemicals’ – that not only impact the environment, but human health as well.
“The financial sector is the engine behind petrochemical expansion, providing billions of dollars in bonds, loans, and investments that make these enormous, capital-intensive projects possible,” the report states. “Moreover, because petrochemicals are deeply entwined with fossil fuels, significant petrochemical financing is channeled through funding for major fossil fuel companies, highlighting the inextricable nature of these two industries.”
While the majority of investments come from US banks, European and Japanese banks have also invested.
Germany’s Deutsche Bank has provided $6.3bn in financing, while France’s BNP Paribas financed $3.9bn. In the UK, HSBC has financed $7.6bn in the petrochemical expansion of the US.
Japan’s Mizuho Financial and Mitsubishi have also contributed, with $9.3bn and $3.9bn respectively.
In total, US banks have provided 39.3% of petrochemical financing, Japanese banks 14.9%, British banks 12%, Canadian banks 6.9%, and French and German banks 12.2%.
Findings not surprising
The study echoes findings in other reports on the topic. A report from 2023 found that the US and Europe have been bankrolling the expansion of petrochemicals, with oil companies increasingly selling more and more of their products to the chemical industry as demand in other sectors falters.
The latest findings are not surprising, said Fredric Bauer, researcher at Lund University and author of the earlier report.
“It’s not the first time this point is being made but it’s important to repeat it,” he said. “Chemicals and petrochemicals are a fully integrated part of the fossil fuel value chain.”
If the world accepts that fossil fuels should not continue, then expansion of the petrochemical industry should also cease, he added.
“What’s slightly different about the petrochemical industry is that it’s not just about the climate impact. It’s actually even worse, because it’s also [a] hazardous product for which there is massive liability for the firms, and potentially, its shareholders”.
ESG funds include petrochemical companies
Financing is not just from banks either. Investment companies such as Vanguard and Blackrock have also invested heavily in the petrochemical industry, the report finds.
Meanwhile, ESG funds are also involved. The report finds $10.3bn in ESG-linked investments in companies that are expanding their petrochemical operations.
This shows how broken the ESG rating system is, which is often based on data from just a handful of companies, said CEIL campaigner Marks. “This makes it clear that ESG ratings systematically understate the risks associated with plastics, in particular, failing to fully account for the carbon emissions of the full life cycle of plastic and petrochemical production, while also ignoring the broader environmental, social and health impacts,” he said.
Blackrock accounts for many of these investments, with $4bn invested. These ESG funds include some of the largest producers of plastics and fertilisers, along with oil and gas firms.
“Hiding serial polluters in ESG funds, known as ESG washing, misleads the public, undermines corporate accountability, shields misconduct from public scrutiny, and reduces pressure on investors to demand real corporate reform,” the report states.
Many of these companies are included in ESG funds because ratings companies focus on the financial material risk of the firms, rather than their real-world environmental impact.
Ultimately, central banks and regulators should do more to stop financing of these industries as it exposes banks and investors to greater risk.
“It is incumbent on central banks and financial regulators to put in place regulations and policies that require banks to decrease and then stop financing in this risky environmental industry,” said Marks.
While oil companies might hope to see continued growth in plastics, “if we want to think about a sustainable future in terms of material use, that is not the way to go”, said Bauer.
“We have to get rid of the fossil fuel dependency. That means we have to get rid of a fair chunk of the demand also for these fossil fuel-based materials and products.”
This page was last updated April 28, 2026
Written by
Moriah Costa is the Editor-in-Chief of Green Central Banking and has over a decade of experience writing about banking and finance. She is an award-winning American journalist based in Paris and has written for major international publications, including Reuters, The Guardian, and S&P Global. Having grown up in water-stressed Arizona, she has always had a strong interest in bringing awareness to climate and environmental issues.
