As climate-related harm accelerates, economy-wide losses are increasing and posing growing risk not only to the individual companies in which shareholders invest but, significantly, to their entire portfolios. A 2018 analysis in Nature found that limiting global warming at 1.5°C versus 2°C will save $20 trillion globally by 2100. Failure to maintain warming below 2°C will cost the economy vastly more. 

Banks will play a critical role in either helping to meet this challenge—or failing to do so. Currently banks, through their lending practices, loan portfolios, underwriting, and investments, are playing an outsized role in funding the fossil fuel operations that are wreaking havoc on the climate. The Bank of England notes that the global financial system is supporting carbon-producing projects that will cause global temperature rise of more than 4°C—more than double the limit necessary to avoid catastrophic warming. 

The European Investment Bank, the biggest multilateral lender in the world, has recognized these risks and will stop funding fossil fuel projects in 2021. Other European banks have also started to act. HSBC has committed to set a science-based target to reduce its carbon footprint in line with the Paris goals. ING, BNP Paribas, Standard Chartered, and others have committed to measure the climate alignment of their lending portfolios against Paris goals. Some have abandoned high risk sectors, including Arctic drilling and tar sands. 

U.S. banks are the largest funders of companies causing climate change and are lagging behind the progress made by European peers. While increasing their green financing and reducing their own limited operational emissions, they continue to provide alarming levels of fossil fuel funding. Year after year, JPMorgan Chase has held the top spot in terms of fossil fuel financing, with Wells Fargo, Citibank, and Bank of America comprising the next three largest funders. Recent announcements by Goldman Sachs and JPMorgan Chase to limit financing of coal mines, some coal power plants, and Arctic projects represent an important first step. But, this reaches only a small part of their total fossil fuel financing. Across the board, these five U.S. banks have failed to set any Paris-aligned targets.

This year, As You Sow’s shareholder proposal with JPMorgan Chase asks the bank if and how it will reduce the greenhouse gas emissions of its total lending activities in alignment with the Paris Agreement’s 1.5°C goal. The proposal emphasizes the need to measure and disclose its full carbon footprint and set a target to reduce emissions associated with its lending activities. Only through taking such steps can JPMorgan Chase assure investors it is appropriately reducing its contribution to the systemic, material risks that the climate crisis poses to investor portfolios.

Similar proposals this year filed with Bank of America, Morgan Stanley, Wells Fargo, and Goldman Sachs have prompted productive dialogues and commitments toward evaluating and measuring progress in reducing emissions, with an eye toward Paris alignment. Such movement stands in contrast to JPMorgan Chase’s unwillingness to commit, in any substantial way, to measure or begin reducing its total carbon footprint in alignment with Paris goals. 

DANIELLE FUGERE
President, As You Sow