We are quickly running out of time to avoid catastrophic climate impacts, and bank lending, as the world’s largest source of finance, will play an outsized role in the shift to a clean energy economy. Thirty-three global banks have provided the fossil fuel industry with $1.9 trillion in financing since the Paris Agreement was signed. It is imperative that bank lending shifts quickly from supporting a fossil fuel economy to enabling one based on clean and sustainable energy, transport, agriculture, and manufacturing systems.
Bank lending determines not only which projects move forward and which don’t, but because banks are uniquely able to create money and credit, they wield an influence over companies and projects that few other entities can approach. In short, bank lending has the power to make or break energy, agriculture, and manufacturing markets, and to heavily influence how those markets affect the climate.
Investors are calling on banks to assess and manage the climate risk embedded in their lending and investment portfolios. Measuring and managing a bank’s salient risk – the risk to society – will require measuring its financed emissions using tools like those available through the Partnership for Carbon Accounting Financials (PCAF).
JPMorgan Chase. As the climate crisis escalates, JPMorgan shareholders have become increasingly concerned by the bank’s ongoing and outsized financial commitment to fossil fuels, particularly as it contradicts company and CEO Jamie Dimon’s statements in support of the Paris Accord and the need for urgent climate action. During the 2020 proxy season, investors filed three resolutions with the company seeking to highlight JPMorgan’s exposure to climate risk through a variety of requests:
- Report on Reducing GHG Emissions Associated with Lending Activities: As You Sow Foundation
- Project Financing Related to the Arctic and the Canadian Tar Sands: Trillium Asset Management
- Proxy Voting Policies Related to Climate Change: Boston Trust Walden
Sector-Wide Action. Investors targeted 6 large banks in the US and one in the UK in the 2020 season and were successful in getting the banks to move on a variety of climate-related proposals, from setting policies restricting lending for coal and Artic drilling, to exploring the setting of GHG targets. The gains made with these companies in 2020 signal an important shift in bank policies and commitments.
Morgan Stanley, one company consistently engaged by ICCR members, recently joined the Steering Committee of the Partnership for Carbon Accounting Financials (PCAF), and has announced a new commitment to reach net-zero financed emissions by 2050.
Banking on Climate Change: Fossil Fuel Finance Report 2020, Report by Rainforest Action Network, BankTrack, Honor the Earth, Indigenous Environmental Network, Oil Change International, Sierra Club
Banking on a Low Carbon Future, report by Boston Common Asset Management
Harmonising and Implementing a Carbon Accounting Approach for the Financial Sector Platform Carbon Accounting Financials (PCAF) Report 2018
UNEP Finance Initiative Principles for Responsible Banking
Science Based Targets Finance Sector Protocol (Summary of Stakeholder Feedback)