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Banks and Climate
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By Mary Minette, Director of Shareholder Advocacy, Mercy Investment Services

The banking sector is the world’s largest source of finance, with a critical role to play in ensuring that resources are available to provide climate solutions and reducing lending to climate-damaging fossil fuel projects. Investors are working to engage the largest global banks to urge the adoption of policies and procedures that address these environmental risks and to ensure that the global finance system is part of the solution to climate change.

In the 2020 and 2021 proxy seasons, investors escalated efforts to push the largest banks to assess, disclose, and reduce the climate risk and climate impact of their lending and investments. In 2020 proposals filed with several of the largest U.S. banks including Bank of America, JP Morgan Chase, and Wells Fargo requested reports on how the banks are managing climate risk in their lending portfolios. Proposals were withdrawn at Wells Fargo and Bank of America after the banks agreed to analyze various methods to measure financed emissions and consider adopting targets. The proposal with JP Morgan Chase received a near-majority vote of 49 percent at the bank’s annual meeting.  

Following this successful season, Citi, Morgan Stanley, and Bank of America announced that they would work to measure the climate impact of their financial practices and agreed to strive for net zero financed emissions by 2050. JP Morgan Chase announced plans to reduce their financed emissions in line with the goals of the Paris Agreement. However, despite these announcements, a series of reports by a coalition of groups including Rainforest Action Network and BankTrack have found that many of these banks have increased their support for oil and gas production in recent years. 

The International Energy Agency reported in 2021 that new oil and gas exploration and production will need to cease almost immediately for global temperatures to stay within the 1.5 degrees Celsius limit. This year, investors plan to file proposals with several of the banks, including JP Morgan Chase, the largest funder of oil and gas production globally, asking them to adopt policies to ensure that financing does not contribute to new fossil fuel supplies.   

At the recent climate summit in Glasgow, more than 450 financial firms from 45 countries announced they were forming the Glasgow Financial Alliance for Net Zero (GFANZ) to help shift the world’s economy toward net-zero emissions by 2050. The group includes Citi, Bank of America, and JP Morgan Chase. While this is a welcome announcement, the details of how banks will achieve their goals are not known. A spokesman for the Rainforest Action Network noted that “39 banks that are part of [GFANZ] provided around $575 billion in lending and writing to fossil energy companies in 2020 alone.” 

With the work with banks shifting from long-term targets to Net Zero goals – and particularly how they will begin to move financing away from oil and gas companies – the Portfolio Advisory Board is focusing on engagements with Bank of America, JP Morgan Chase, PNC, and Wells Fargo for the coming shareholder season.

 

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