Within the local weather motion’s ongoing efforts to chop off the financing of the fossil gasoline trade, maybe no offender has loomed as giant as the massive banks. For almost a decade, organizers have been naming and shaming the banks that prop up the oil, fuel and coal industries, figuring out them as key drivers of local weather chaos.
There’s a easy purpose why banks have been such a giant focus: they revenue from offering an important monetary lifeline to the fossil gasoline trade, preserving it in enterprise and even increasing whereas it spouts carbon air pollution into the ambiance and harmful chemical substances into frontline communities.
Particularly, banks provide fossil gasoline firms with the money, credit score, cowl and counseling to maintain and develop their operations. Banks instantly lend big quantities of cash to fossil gasoline firms by time period loans and credit score services that these firms can draw on to cowl their enterprise prices, whether or not that’s constructing a brand new pipeline or creating a brand new oilfield. They supply essential middleman companies, corresponding to underwriting new firm inventory and bond issuances. Banks additionally rake in hundreds of thousands for facilitating mergers and acquisitions inside the fossil gasoline trade.
Along with being key gamers within the every day replica of world fossil capitalism, banks are extraordinarily highly effective actors inside — and the monetary beating coronary heart of — the bigger company energy construction. They’re run by influential and lavishly-paid executives, boards which are intertwined with broader networks of company energy, and well-connected armies of lobbyists. The imprint of banks is sort of in all places: from our private financial savings accounts, to the names of sports stadiums, to the sponsors of native community events, to the boards of police foundations. The most important banks have an in depth and comfortable relationship with the federal authorities, with a gradual revolving door between the trade and regulatory companies. Particularly in instances of disaster, banks and their executives turn into digital advisors to high U.S. leaders.
Whereas pushing banks to chop off funding for local weather destruction stays a frightening problem, they do have some vulnerabilities. Many banks are consumer-facing, with tens of hundreds of thousands of peculiar clients who care in regards to the destiny of the planet and its folks. They’re topic to authorities oversight and regulation, together with around climate, and this may be deepened by activist pressure and additional coverage modifications. They’ve executives and administrators with public profiles who care about their reputations. All this opens up factors of leverage for organizers to marketing campaign round as they proceed to attempt to drive a wedge between banks and the fossil gasoline trade.
How do banks finance and revenue from local weather chaos?
The ways in which banks prop up and revenue from the fossil gasoline trade are very concrete and, whereas advanced of their particulars, are straightforward to know of their fundamental essence. These embody:
- Underwriting bonds: Banks assist oil, fuel and coal firms elevate big quantities of money by underwriting their company bonds (additionally referred to as notes). Bonds and notes are types of debt that firms can subject to patrons in order that they’ll elevate cash to finance their enterprise. For instance, in 2020, a consortium of 23 banks led by Financial institution of America, Citi, and JPMorgan agreed to facilitate $9.5 billion in company notes for ExxonMobil notes. Underneath the settlement, the banks agreed to every buy after which promote discrete chunks of the entire $9.5 billion. Exxon stated it will use the proceeds for “basic company functions, together with, however not restricted to, refinancing a portion of our present business paper borrowings, funding for working capital, acquisitions, capital expenditures and different enterprise alternatives.” For his or her half, the banks revenue within the hundreds of thousands from all this by fees they cost.
- Credit score services and time period loans: A most important manner that banks prop up fossil gasoline operations is thru credit score services, which is one other manner of claiming that banks make a sure amount of cash obtainable for oil, fuel and coal firms to attract on and borrow if they want. The businesses can then use these funds for his or her operations, enlargement and different prices. For instance, eighteen banks led by Financial institution of America and JPMorgan Chase supplied a $3.25 billion credit facility to Atlantic Coast Pipeline LLC, which was overseeing the development of the now-defunct Atlantic Coast Pipeline (the opposite banks dedicated to the credit score facility have been the Financial institution of Nova Scotia, Barclays, BB&T, CoBank, Credit score Suisse, Deutsche Financial institution, KeyBank, Mizuho, MUFG, Nationwide Financial institution of Canada, PNC Financial institution, Royal Financial institution of Canada, Sumitomo Mitsui, Suntrust, TD and Wells Fargo). Lynn Good, the CEO of Duke Power, a 47% proprietor of the pipeline, stated the credit score facility can be used to “fund roughly half of the pipeline building prices” and that “the mission has borrowed $570 million towards the ability to cowl prices incurred thus far.” Fossil gasoline firms may take out “time period loans” with banks which, in contrast to credit score services, have extra particular mortgage quantities and payback dates. Right here, for instance, is a filing the place refining large Phillips 66 refers to a $450 million time period mortgage it took out. Banks revenue from all these loans primarily from curiosity funds when the mortgage is paid again.
- Advising on mergers and acquisitions: Fossil gasoline firms generally purchase each other and merge, and so they want banks to advise, information monetary transactions and supply bridge loans to facilitate all this. For instance, one of many largest oil mergers in current a long time was Occidental’s acquisition of Anadarko. The Financial Times reported that Financial institution of America and Citi have been advising Occidental on the merger and will rake in $170 million in charges to separate with Anadarko’s advisors. Greater than $100 million extra could possibly be earned by the banks by financing the transaction.
By mechanisms and relationships like these, banks play an indispensable position within the operation and enlargement of the fossil gasoline trade that’s driving local weather disaster.
Which banks finance local weather chaos?
Yearly a gaggle of local weather organizations launch a fossil gasoline finance report that paperwork the highest banks which are financing local weather chaos. The 2023 report seems to be on the high 60 international banks by property and ranks them in keeping with how a lot they finance the fossil gasoline trade by lending and underwriting. The report finds that, in 2022 alone, these banks supplied $673 billion to fossil gasoline firms. From 2016 — the 12 months of the Paris Settlement — to 2022, the highest 60 banks have supplied an astounding $5.5 trillion in financing to fossil gasoline firms.
The highest 4 financiers of fossil fuels from 2016 to 2022 are all powerhouse U.S. banks: JPMorgan Chase, Citi, Wells Fargo, and Financial institution of America. Collectively, throughout these years, these 4 banks alone have financed the trade to the tune of a whopping $1.366 trillion — a full quarter of all financing to the fossil gasoline trade among the many high 60 banks.
It needs to be added that these 4 banks are additionally the top four holders of U.S. home deposits, which means they’re financing fossil fuels with the money deposits of standard working individuals who overwhelmingly support motion to mitigate local weather change.
The report additionally breaks down financing in particular areas. JPMorgan and Citi are far and away the highest financiers among the many high 100 key oil, fuel and coal firms increasing fossil fuels from 2016 to 2022. New Jersey-based TD financial institution is the highest financier of the highest 27 high tar sands firms and 6 key tar sands pipeline firms in 2022. JPMorgan has been the highest financier of the highest 30 Arctic manufacturing firms from 2016 to 2022 (Citi is #3 and Financial institution of America is #7). Wells Fargo has been the highest fracking financier from 2016 to 2022, adopted by JPMorgan, Citi, and Financial institution of America.
It’s additionally value noting that banks themselves, by their asset administration arms, are massive stakeholders in fossil gasoline firms. For instance, JPMorgan Chase owns about 4.9% of Conocophillips and 1.3% of ExxonMobil; Financial institution of America owns about 1.6% of Chevron and 1.32% of ExxonMobil; Citi owns 2.27% of DCP Midstream and just below one p.c of ExxonMobil; Wells Fargo owns 3.66% of Phillips 66 and 0.79% of EOG Assets.
Whereas the massive fossil financing banks make a spread of local weather gestures, from making net-zero declarations which are a long time away to sponsoring local weather summits, this in the end quantities to greenwashing when in comparison with their steady dedication to funding fossil fuels — for instance, by constantly rejecting pro-climate shareholders proposals that will ensure they hold bankrolling local weather chaos.
Prime shareholders of fossil gasoline firms are the identical high shareholders of fossil-financing banks
Furthermore, the most important asset supervisor homeowners of fossil fuels — BlackRock, Vanguard, State Road — are additionally the highest shareholders of the foremost fossil financing banks. For instance, the highest useful homeowners (with a 5%+ possession stake) of every of the massive 4 fossil financing banks, as listed within the banks’ most up-to-date proxy statements, embody asset administration giants BlackRock and Vanguard who, as we’ve shown, are additionally the highest shareholders of publicly-traded fossil gasoline firms throughout the board, whereas Warren Buffett’s Berkshire Hathaway is the highest shareholder of Financial institution of America.
Because of this simply two asset administration corporations (Vanguard and BlackRock) have a 15.96% stake in JPMorgan, a 15.88% stake in Wells Fargo, and a 17.06% stake in Citi, whereas these two corporations plus Buffett’s berkshire Hathaway collectively have a 26.4% stake in Financial institution of America.
In essence, the highest shareholders of the fossil gasoline trade — the massive asset managers — are additionally the highest shareholders of the banks which are the highest financiers of that very same fossil trade trade. All this factors to the strategic significance for the local weather motion in specializing in the interlocking internet of monetary actors that prop up and revenue from the fossil gasoline trade.
The Huge Banks’ lobbying operation
Whereas particular person banks have their very own big lobbying operations — JPMorgan alone spent almost $4 million on federal lobbying in 2022 — the trade as a complete depends on commerce teams to advance their pursuits amongst elected officers and regulators.
Key banking trade lobbying teams embody the American Bankers Association, Securities Industry and Financial Markets Association, and the Bank Policy Institute, the latter of which is governed by main financial institution CEOs (JPMorgan’s Jamie Dimon is the Chairman) and spent $2.47 million on federal lobbying in 2022.
Different financial institution lobbying teams embody the Investment Company Institute — which represents massive asset managers, but in addition banks with asset administration wings — and the U.S. Chamber of Commerce, which broadly represents the pursuits of the U.S. company class and whose board contains a number of banks and monetary teams. Financial institution of America, Barclays, BlackRock, Citigroup, Credit score Suisse, JPMorgan, Morgan Stanley, TD Financial institution, and Wells Fargo are all members of the U.S. Chamber of Commerce.
Whereas just about each financial institution has a “sustainability” web page on its web site, lobbying efforts by banks and their trade teams assist prop up the fossil gasoline trade and assist keep the trade’s bankrolling of local weather destruction. A 2022 report by Affect Map report documented the in depth lobbying efforts by the banking trade towards stronger local weather regulation.
For instance the report notes that in 2021 trade associations just like the American Bankers Affiliation pushed to take away “express references” to “ESG components” when consulted by the U.S. Division of Labor’s on its Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights, which units tips round fiduciary obligation for retirement accounts, together with round local weather points and local weather danger. The trade teams additionally “opposed necessary ESG concerns within the funding course of.”
The report additionally notes, for instance, that in 2021 the Financial institution Coverage Institute advocated to the SEC “for a gradual and versatile method” to local weather change disclosures and that the U.S. Chamber of Commerce’s “sustained opposition to regulated company local weather disclosure.”
Government and board energy: The case of JPMorgan Chase
To grasp the facility and affect of the banking sector, it’s instructive to take a look at its strongest member, and the world’s high financier of fossil fuels: JPMorgan Chase.
JPMorgan is a banking behemoth with $3.7 trillion in property and a quarter-million workers globally. Its dimension and energy is the results of over two centuries of enlargement, mergers and consolidation. The financial institution has quite a few arms: business banking, monetary companies, asset administration, and extra. In 2022 it raked in a whopping $35.6 billion in earnings.
In current a long time, JPMorgan has risen above even the opposite mega-banks because the U.S.’s banking hegemon. In 1991, its market share was 1.5%, versus 14.4% today — a ten-fold enhance in its domination of the banking sector. What BlackRock is to asset management, when it comes to its centrality and energy inside that sector, JPMorgan is to banking and monetary companies.
This centrality was not too long ago seen, for instance, in JPMorgan’s go-to position in buying the large failing U.S. banks SVB and First Republic. In searching for assist with the latter, the Financial Times studies that JPMorgan CEO Jamie Dimon was the “first port of name” for Treasury secretary Janet Yellen.
In different phrases, like BlackRock, JPMorgan isn’t only a financial institution — it’s a construction that the whole monetary system runs by and is determined by. Financial historian Adam Tooze said that JPMorgan’s savior position within the current financial institution collapses moved it “from being simply one of America’s massive banks to being the American financial institution. It’s the central participant within the system” and a “common participant, a key participant, in funding banking, market making, in asset administration…”
On the helm of this monetary goliath is without doubt one of the most influential CEOs on the earth: Jamie Dimon.
Dimon, the longest-serving financial institution chief, is a billionaire who raked in almost $100 million in whole money and inventory compensation from 2020 to 2002. As of Could 12, 2023, he owned, instantly and not directly, 8,631,515 shares of JPMorgan inventory, value over $1.1 billion. Whereas Dimon is not any Jeff Bezos, he does flaunt his wealth and standing — notoriously, in tone-deaf and ostentatious household Christmas cards he despatched out in 2013.
Neither is Dimon a purely monetary bigwig. À la union-buster-in-chief Howard Schultz, he fashions himself one thing of a political chief, and rumors have circulated for years over potential Dimon presidential runs.
Past the facility he wields on the helm of the core U.S. financial institution, he’s additionally extraordinarily well-networked. Amongst different ties, Dimon is a director of the Business Roundtable, chair of the Bank Policy Institute, an govt committee member of the Partnership for New York City, and, in keeping with his company bio, a member of the Council on International Relations and a board member of Harvard Enterprise Faculty.
Regardless of green lip service, Dimon is unabashedly pro-fossil fuels.
In August 2022 he lamented to shoppers: “Why can’t we get it by our thick skulls” that America ought to “increase extra oil and fuel?” (which he stated can be good for the local weather). In September 2022 he pleaded to Congress that the U.S. wanted to spend money on extra fossil fuels and stated if his banks stopped funding new fossil gasoline merchandise it will “be the road to hell for America.” In January 2023 he informed Fox Information that “we need pipelines” and “permits.”
The coalition Cease The Cash Pipeline has gone as far as to state that at “numerous factors over the previous few years,” Dimon “has primarily remodeled right into a fossil gasoline lobbyist” — for instance, when JPMorgan secretly emailed the Trump administration to bail out the oil and fuel trade throughout the onset of the pandemic.
JPMorgan’s fossil financing shouldn’t be solely upheld by Jamie Dimon, but in addition by his boss: JPMorgan’s Board of Administrators, the entity that governs the corporate and has the facility to rent and hearth high executives.
Merely put, JPMorgan’s board is a who’s-who of giant company bigwigs that represents key industries from insurance coverage to telecoms, retail to healthcare, protection to manufacturing. In flip, the corporate’s administrators — and the affiliations they carry — are all a part of the broader internet of energy behind the financial institution that upholds its main position in propping up local weather chaos.
Companies represented on JPMorgan’s board, as measured by the present and previous affiliations of board members, embody: NBCUniversal, GEICO, Amazon, KPMG, United Well being, Walmart, Alcoa, Johnson & Johnson, Starbucks, Basic Electrical, IBM and extra. Ties like these mirror how JPMorgan is instantly located on the middle of the U.S. financial system and its main industries that drive extraction and exploitation.
Strikingly, Berkshire Hathaway, the funding conglomerate owned by Warren Buffett, the world’s fifth-richest individual (internet with: $106 billion), has two important ties to JPMorgan’s board. Berkshire Hathaway, it needs to be famous, is bullish on fossil fuels and has an power and utility arm that has been traditionally bad on local weather points.
Lobbying powerhouses and assume tanks just like the Enterprise Roundtable and Council on International Relations, in addition to main universities like Northwestern and College of Pennsylvania, are tied to JPMorgan’s board by community interlocks.
One JPMorgan director, Mellody Hobson, is a giant enterprise superstar — a good friend of Oprah and the Obamas who’s married to billionaire Star Wars creator George Lucas. Hobson additionally occurs to be the Starbucks board chair, serving to to supervise a historic union-busting marketing campaign.
Maintaining the strain up on Huge Banks
With the persistent opposition from banks to extra aggressive local weather motion and to defunding fossil fuels, the outlook stays difficult for local weather and environmental justice organizers in attempting to finish banks’ oil, fuel and coal financing. However, banks stay a vital and strategic focus for the local weather motion for numerous causes.
Foremost, as a marketing campaign goal they’re extra susceptible than the fossil gasoline trade itself. ExxonMobil, for instance, is existentially devoted to grease and fuel manufacturing, which is its core enterprise. No quantity of protesting at, say, Exxon’s company headquarters will change that. However Financial institution of America, however, is a consumer-facing model that does the overwhelming majority of its enterprise exterior of the fossil gasoline sector. Whereas Exxon — or Chevron, or ConocoPhillips, and so forth — can’t abandon fossil fuels with out changing into a completely completely different firm, Financial institution of America — or JPMorgan, or Wells Fargo, and so forth — may transfer away from fossil fuels and proceed working kind of usually.
As a result of banks have lots much less to lose than fossil gasoline firms in ditching oil and fuel, and since they do enterprise with hundreds of thousands of shoppers and hundreds of different firms that care deeply about local weather points, they could be simpler to maneuver. On high of that, there’s evidence that banks face important monetary danger from the local weather disaster and from enterprise with fossil fuels — a degree that activists and concerned shareholders can proceed to agitate round.
Furthermore, the technique of going after banks has a confirmed document of success. To take one instance: in 2019, on account of strain from campaigns just like the Households Belong Collectively coalition, organizers succeeded in pushing banks to halt almost all of their time period loans and features of credit score to the personal jail trade. And despite the fact that it didn’t cease the Dakota Entry Pipeline, the exposure of the banks that have been financing the mission expanded the area of protest for organizers and educated hundreds on the position of Wall Road within the buildout of fossil gasoline infrastructure.
Proper now, quite a few organizations and campaigns are working to push banks to interrupt with fossil fuels, For instance, the Cease the Cash Pipeline coalition, made up over over 200 organizations, has ongoing campaigns centered on banks and their ties to the fossil gasoline trade, and its member teams are continuously engaged in protest actions, shareholder activism, new campaigns, and different work geared toward driving the wedge between banks and the fossil gasoline trade.
Whereas a difficult activity, activists should sustain the battle to strain banks — who in spite of everything, stay strategic local weather targets with their very own vulnerabilities and fissures that campaigns can set up round — to halt its position in local weather destruction.
