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In the lead-up to recent climate talks in Glasgow, Scotland, some were calling COP26 the “Finance COP.” This was, in part, because Mark Carney, the former governor of the Bank of England, had been working tirelessly to secure new climate commitments from financial institutions across the globe.
Carney finally had his big moment in Glasgow when he announced that over 450 of the world’s largest financial institutions — including banks, insurers, pension funds and asset managers — had joined the Glasgow Financial Alliance for Net Zero (GFANZ) and committed to achieving net zero emissions by 2050. “The architecture of the global financial system has been transformed to deliver net zero,” stated Carney as he unveiled the news.
There were, however, two key words missing from the financial sector’s big moment. Not once in the 1,349-word press release proclaiming the financial industry’s new-found dedication to climate action did the words “fossil fuels” appear. To say that this is problematic is an understatement.
One study calculated that 71 percent of all of history’s greenhouse gas emissions come from just 100 fossil fuel companies. Not only that, but fossil fuel corporations have spent 40 years funding climate denial and waging war against even incremental proposals for climate action.
To tackle the climate crisis without confronting fossil fuels is like trying to put out a fire without doing anything to stop the people pouring gasoline on the flames. But that appears to be the approach that the financial sector is taking. Nowhere is this more obvious than on Wall Street.
In the five years after the Paris Agreement was signed in 2015, just six U.S. banks — JPMorgan Chase, Citigroup, Wells Fargo, Bank of America, Morgan Stanley and Goldman Sachs — have loaned a little shy of $1.2 trillion to the fossil fuel industry. To give that some context, consider that $1.2 trillion is more than double the current share market value of ExxonMobil, Chevron and BP combined.
In spite of their deep ties with the fossil fuel industry, every major U.S. bank has signed on to the Glasgow Financial Alliance for Net Zero and committed to achieving net zero emissions by 2050. Yet none of them have committed to ending their support of the industries that are most driving the climate crisis. Indeed, they seem intent on doing the opposite. Goldman Sachs CEO David Solomon recently vowed to continue providing finance to the oil and gas industry; Chase CEO Jamie Dimon has expressed similar sentiments.
A few months before the start of COP26, JPMorgan Chase, the world’s largest funder of fossil fuels, became the first major U.S. bank to set 2030 climate targets. Unfortunately, rather than actually reducing the overall greenhouse gas emissions associated with its lending, Chase chose to reuse a convoluted accounting trick often used by Big Oil known as “carbon intensity,” pledging that by 2030, it will achieve a 15 percent reduction in the “carbon intensity” of the oil and gas firms it finances.
Here’s how Chase’s carbon intensity commitments work: Imagine you are the CEO of an oil firm. Your company owns 1,000 oil wells. You receive a $10 billion loan from Chase. You use that loan to buy 400 additional oil wells and 400 windmills. This means you are digging up and burning more oil than ever before; your overall contributions to climate change have gone up significantly. But because you are now also profiting from wind power, the “carbon intensity” of your company has gone down — an accounting trick that allows your oil company to expand oil production and banks like Chase to meet their greenwashed climate targets.
During COP26, Morgan Stanley became the second U.S. bank to release 2030 climate targets, announcing a plan to slash emissions in the energy, auto and manufacturing sectors. Unfortunately, Morgan Stanley’s targets are only a half-step better than Chase’s.
The press release announcing Morgan Stanley’s 2030 targets claims that the company’s targets are based on the International Energy Agency’s (IEA) Net Zero by 2050 pathway. However, a key part of the IEA’s recommendations was that “there is no need for investment in new fossil fuel supply in our net zero pathway.” Unsurprisingly, a promise from Morgan Stanley, the world’s largest funder of new LNG terminals, to immediately end support for the expansion of the oil and gas industry was not forthcoming.
Given the collective failures of Carney, Chase and Morgan Stanley, it’s understandable that many activists denounced COP26 as nothing more than a “greenwashing festival.” This failure also makes it clear that we need the federal government to regulate financial institutions that are unwilling to do what’s necessary to curtail catastrophic climate change.
There have been some small first steps toward reigning in Wall Street’s ability to wreck our climate. In May 2021, President Biden issued the first-ever Executive Order on Climate-Related Financial Risk, directing federal regulators to analyze and mitigate the risk that climate change poses to the economy.
In response, the Financial Stability Oversight Council (FSOC), the federal government’s most powerful financial regulator, released a report outlining what the climate crisis should mean for the financial sector. Unfortunately, although FSOC affirmed that U.S. financial regulators do, in fact, have the authority and obligation to address the climate crisis, it failed in several key regards. Most importantly, the report didn’t even mention that U.S. banks are actively driving the climate crisis by financing the continued expansion of the fossil fuel industry.
Of greater hope is the Fossil Free Finance Act. Introduced by Representatives Mondaire Jones, Rashida Tlaib and Ayanna Pressley last fall, the Fossil Free Finance Act would prohibit the funding of new fossil fuel projects by 2022 and the funding of all fossil fuel projects by 2030. It is legislation that meets the scale and urgency of the climate challenge — which is, of course, exactly what is required.
Yet so far, only 22 Members of Congress have signed on to co-sponsor the Fossil Free Finance Act. If our elected officials are at all serious about addressing the climate crisis, that number must grow dramatically in 2022.