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What is the force of these banks on empowering adverse climate actions?
Are banks that are financing fossil fuels and oil and gas developments just as guilty as the bad actors themselves? Arguably so. But the good news is that the banks are starting to make their moves too.
JP Morgan: From Climate Destructor to Climate Leader?
At JP Morgan’s annual investor meeting in February, they announced two sustainability commitments. First, a goal to “facilitate” $200 billion of transactions” that support the UN Sustainable Development Goals (with a $50 billion carve-out targeted towards green initiatives for 2017 clean financing target). Additionally, in a do less harm initiative, JP Morgan will restrict financing new coal-fired power plants while winding down its lending to the industry by 2024 and ceasing to fund new oil and gas drilling projects in the Arctic.
Whether the bank is doing this for “good reasons” or just to mitigate climate and reputational risk the world’s largest financier of fossil fuels is making its moves in response to pressure from investors and activists.
Or maybe JPMorgan is just playing catchup after providing $196 billion in only three short years to funding to fossil-fuel projects between December 2015 (Paris Climate Agreement) and the end of 2018. JPMorgan was the world’s largest banker of Arctic oil and gas, and Wells Fargo and JPMorgan were cited as the largest bankers of fracking. According to a 2018 Rainforest Action Network report, JPM was the lead fossil fuel financier at $196 billion (coming in at a close second was Wells Fargo with $152 billion) since 2015, the Paris Climate Accord.
The report tallied up the total contribution to funding from 33 global banks to the fossil fuel industry to $1.9 trillion. That’s a massive number, especially when compared to Global Green Bond and Green Loan Issuances over the same timeframe, estimated at $258 billion as per a recent report authored by the Climate Bonds Initiative. These numbers indicate that the largest financial institutions are still supporting initiatives that are furthering the climate crisis and disregarding the IPCC report on global warming that outlined the need to phase out.
The IPCC report called out the severity of the consequences of global warming of greater than 1.5 degrees celsius and outlined the urgent need to phase out fossil fuels and to replace them with funding for clean energy initiatives of around $2.4 trillion annually between 2016 and 2035.
Can U.S. banks convert from being bad actors to leaders in the fight against climate change?
JPMorgan’s announcement comes on the heels of a similar pronouncement from Goldman Sachs in December as they pledged $750 billion over 10 years to finance “climate transition and inclusive growth” in December. Although JP Morgan is just lightly dipping its toe in the good news is that when one of these behemoths financial institutions move others may feel the pressure too to stop empowering the bad guys. JPMorgan’s initiatives from being a facilitator to a leader in this space could send a powerful, resounding message reverberating throughout Wall Street financial institutions. Once the bad climate actors are crippled with a lack of financing, they could be forced out of business or better yet put their resources into reverse their bad habits.
But does this go far enough?
What’s the next step? First — for JP Morgan to be held accountable to and to fulfill its commitment it has put out into the ether — and to inspire other bad actors to become good actors. Leadership could also come in the form of collaboration with oil & gas industries on transition projects financed by green bonds. In doing so, we could also learn and follow in the footsteps of our European compatriots who have long been moving in that direction NatWest Group (f/k/a Royal Bank of Scotland) has proclaimed its goal to become “climate positive” by 2025.
(Photo Credit: Isabelle OHara / Shutterstock.com)
