Supply disruptions resulting from the Ukraine invasion highlight the need to transition to renewables and build energy independence.
NEW YORK, NY, MONDAY, MARCH 28th, 2022 –Shareholders are announcing that proposals they filed for the 2022 proxies of U.S. and Canadian banks will go to a vote at company annual meetings this spring despite SEC challenges by three of the banks.
Shareholders at top U.S. banks — Bank of America ($BAC), Citigroup ($C), Goldman Sachs ($GS), JPMorgan Chase ($JPM), Morgan Stanley ($MS), and Wells Fargo ($WFC) — and Canadian banks, Bank of Montreal and TD Bank, will vote on proposals requesting financing consistent with the IEA net-zero 1.5oC scenario. The proposals at U.S. and Canadian banks call for banks to adopt policies by year-end committing to steps to end financing for new fossil fuel development, in alignment with the International Energy Agency (IEA) conclusion about the pathway to achieving net-zero emissions by 2050. Two additional proposals filed with Royal Bank of Canada ask (1) for the bank to update its criteria for “sustainable finance” to preclude fossil fuel activity and projects facing significant opposition from Indigenous Peoples, and (2) for a policy to preclude the privatization of heavily polluting assets.
Similar proposals raising concern about the IEA’s net-zero scenario were filed with major insurance companies Chubb, The Hartford, and The Travelers. While all three companies challenged the proposals, we have just learned that the proposal at Chubb will advance to a vote. Insurance companies face a double whammy of impacts from climate change, including steadily increasing insured losses from increasingly destructive and unpredictable climate-driven natural disasters. Insurance companies also face the portfolio and reputational risks faced by large banks.
While Citigroup, JPMorgan Chase, and Morgan Stanley all sought relief from the SEC to have the shareholder proposals omitted from their proxies, the resolutions survived the challenges and will advance to a vote at annual meetings this spring. Bank of America, Wells Fargo, and Citigroup will all be holding their annual general meetings on the morning of April 26th. Goldman Sachs will meet on April 28, 2022. JPMorgan Chase and Morgan Stanley have yet to announce the timing of their meetings.
These banks are among the world’s largest funders of the fossil fuel industry: the top six U.S. banks alone provided more than $1 trillion in fossil fuel financing in the years following the Paris Agreement (2016-20), and JPMorgan Chase, Citi, Wells Fargo, and Bank of America have been the largest fossil fuel bankers in the world by a wide margin. In the wake of pressure from investors and other stakeholders, all the banks have now made commitments to achieve net-zero financed emissions by 2050 and have joined the Net-Zero Banking Alliance.
“Public commitments to net-zero by bank executives are frankly meaningless based upon their current financing of fossil fuels. What the banks call their commitments are simply statements that cannot be mandated or enforced by current corporate law or legal statute and represent no change in corporate policy,” said John Harrington of Harrington Investments, Inc., the lead filer of three shareholder resolutions, who narrowly escaped and lost his home to the climate change-induced Atlas Fire in Napa County, California, in October 2017.
The war in Ukraine has been cited as a reason to expand oil and gas production, but the global average time from discovery to first production is 5.5 years for conventional oil, so additional fields will have no impact on short-term oil prices. To the contrary, disruptions to supply from the conflict highlight the need to achieve energy independence by moving quickly to renewables, electrification, and greater energy efficiency.
In their public statements and disclosures, the banks have stated that they seek to align their net-zero commitments with science-based models, including frameworks and methodologies from the International Energy Agency (IEA) and the Net-Zero Banking Alliance led by the United Nations Environment Programme Finance Initiative (UNEP FI). The shareholder proposals are asking that the banks fulfill the recommendations for credible net-zero commitments issued by the UNEP FI and the IEA Net-Zero by 2050 Roadmap report, which clearly stated that investing in new fossil fuel development is not aligned with 1.5°C.
“Committing to align with the IEA and UNEP FI frameworks but failing to fulfill their recommendations will invite accusations of greenwashing, a clear reputational risk for the banks,” said Kate Monahan of Trillium Asset Management. “In underwriting projects that are inconsistent with the IEA and UNEP FI guidance, the banks run a risk of loading potential stranded assets onto their clients’ balance sheets – potentially leading to litigation risk. We should know whether the banks’ lending and underwriting policies are consistent with their net-zero commitments.”
Investors are also concerned about the risk to the larger economy from a failure to hold warming to a 1.5oC increase. “Climate change is a global crisis causing long-term consequences that drastically impact people and communities. We need urgent, concrete action that will limit the harm of climate change and protect people and planet,” said Mary Minette of Mercy Investment Services. “Banks play a critical role in this crisis and need to take accountability for the role their financing of the fossil fuel industry plays in perpetuating climate change.”
The Net-Zero Banking Alliance, to which all the major U.S. and Canadian banks have signed on, recently stated that it “does not support the financing of fossil fuel expansion”. The Alliance “encourages members to conduct client engagement and education as the primary tool for engendering real-economy impact. This is partly accomplished via target-setting. … To achieve these targets, banks will … need to engage with clients, shareholders, and with their own firms to educate, share priorities, gain alignment, and assess operations. Additionally, while portfolio targets will provide concrete metrics for banks to aim for, banks will ideally supplement targets with sector policies that broadly support clients’ transition,” according to guidance provided by the NZBA.
"All of these banks claim to value innovation and sustainability, but with their continued investment in fossil fuel expansion, they're failing to live up to those values or to their own stated commitments to climate action,” said Paul Rissman, a member of the Sierra Club Foundation board of directors. “These resolutions aren't calling for anything the banks haven't already publicly committed to do; in order to achieve the targets they've set out, they must make a plan to phase out their support for fossil fuels and invest in a clean energy future."
About the Interfaith Center on Corporate Responsibility (ICCR)
Celebrating its 51st year, ICCR is the pioneer coalition of shareholder advocates who view the management of their investments as a catalyst for social change. Its 300-member organizations comprise faith communities, socially responsible asset managers, unions, pensions, NGOs, and other socially responsible investors with combined assets of over $4 trillion. ICCR members engage hundreds of corporations annually in an effort to foster greater corporate accountability. Visit our website www.iccr.org and follow us on Twitter, LinkedIn , and Facebook.