A trade association that lobbies on behalf of the largest banks in the United States told regulators that their members’ pledges to reduce investments in carbon-emitting industries are “aspirational,” implying that they shouldn’t be taken seriously by authorities.
The Bank Policy Institute made these remarks in public commentsThe guidelines on climate-related risks management were developed earlier this year, by federal bank regulators, the Office of the Comptroller of the Currency(OCC) and the Federal Deposit Insurance Corporation(FDIC). Specifically, the lobbying group rejected the notion floated by the agencies that regulations should ensure banks’ greenhouse gas commitments to the public “are consistent with their internal strategies and risk appetite statements.”
“The final guidance with respect to public communications should recognize the aspirational nature of external commitments and the fact that these commitments and plans will need to adapt over time as data and methodologies improve and external circumstances change,” the organization said.
The institute urged regulators to “establish realistic expectations with respect to public statements” and said the government “should calibrate its expectations as to the granularity between external statements and internal risk appetite statements accordingly.”
These remarks contrast with the public comments made by other trade organizations on the same subject matter. plainly said that rulemaking on banks’ public commitments could prohibit lying and misleading statements.
Although the OCC and FDIC released separate guidelines, they are nearly identical in terms of their content. The draft rules would only apply to the largest banks in the country — firms with more than $100 billion in assets under management. The Bank Policy Institute is founded in 2018The largest of these institutions were allowed to lobby for financial industry behemoths while the Trump administration pursued a deregulation agenda. The four biggest banks in the country — JPMorgan Chase, Bank of America, Citigroup and Wells Fargo — are the only firms to hold permanent seats on the Bank Policy Institute’s rotating board of directors.
All four banks have pledged to achieve “net-zero” carbon emissions by 2050, though they refuse to stop fossil fuel financing now, as they confirmed during recent congressional testimony in SeptemberDuring questioning from Rep. Rashida Tlaib of Michigan International scientific organizations, such as the Intergovernmental Panel on Climate ChangeThe International Energy AgencyThey have called for an immediate stop to fossil fuel extraction in order to maximize the chance of people around the globe avoiding the worst effects from global warming, namely rising sea levels and more frequent and intense natural disasters.
JPMorgan Chase has been a close partner of the Bank Policy Institute. most prolific financier of fossil fuel enterprisesAccording to Oil Change International, the Paris climate agreements were signed by all countries in 2015. The chair of the Bank Policy Institute’s board of directors is JPMorgan Chase CEO Jamie Dimon, and its chief lobbyist, Kate Childress, had previously spent 10 years as a lobbyist at JPMorgan Chase, ushering the bank through the aftermath of the financial crisis and the passage of Dodd-Frank financial reform. Childress was Dimon’s “point person at the Business Roundtable,” another corporate lobbying group, according to trade publication pymnts.com.
Dimon is a regular media target because he scolds those who call for the immediate downsizing of carbon-intensive energy industries. In August, he accused critics of the oil and gas industries of having “thick skulls” and in September, told Representative Tlaib that withdrawing credit from dirty energy industries “would be the road to hell for America.”
The Bank Policy Institute did not respond to a request for comment on whether it expects banks’ public commitments on climate change to be taken seriously. Representative Tlaib said the remarks show big banks attempting “to avoid necessary oversight of their climate pledges.”
“When big banks make pledges to tackle the very climate change they’ve helped finance — their word isn’t worth the paper it’s written on,” Tlaib told Truthout. She added that large financial institutions “must not only be held accountable for their past actions, but also be forced to divest from fossil fuels today and stop feeding the flames of the climate crisis. As we move towards a clean energy revolution and a green economic future, Congress and the federal government need to continue their unflinching oversight. We will not be bullied into relinquishing our future.”
The OCC and FDIC have drafted the public commitment language, which is perhaps the strongest part of the guidelines. The agencies aren’t seeking to force banks to divest from carbon-emitting energy sources like oil, gas and coal, and even supporters of a stringent banking regulatory framework on climate risk concede that regulators lack the authority to order firms to wean themselves off of certain types of energy investments, even if they wanted to. With clear rulemaking on public obligations, banks can at most pay the price of misleading the public about their carbon footprints.
“Although the FDIC cannot legally mandate that institutions make specific public commitments regarding their loan portfolios, it should require that when institutions articulate measurable targets that they also take the steps necessary to adhere to those targets,” the Center for American Progress said in its comments.
“As financed [greenhouse gas] emissions are a critical driver of both micro- and macroprudential climate-related risk, the FDIC should make clear that having a credible transition plan and reporting on progress is a crucial part of a bank’s risk management system,” said the watchdog group Americans for Financial Reform.
At the heart of the issue are the methods used by banks to move toward “net-zero” carbon emissions in their asset portfolio: investments in “carbon sink” credits or offsets based on the preservation of forests, and carbon capture technology. The promise of the latter has been exaggerated by boosters and the promise of the former hasn’t been proven, according to comments made to regulators by Public Citizen.
“Given these challenges, financial institutions relying on these technologies in their net zero plans should have to demonstrate specific, committed projects that are fully proven to reduce carbon safely and permanently at scale, and appropriately incorporate the cost of both funding and adequately monitoring those commitments into their profitability forecasts,” Public Citizen said. “No projects currently meet these criteria, and there may be none for decades, if ever.”
In one case of carbon credits not living up to their promises, JPMorgan Chase “paid almost $1 million to preserve forestland in eastern Pennsylvania” that “was never threatened; the trees were already part of well-preserved forests,” according to a report published in December 2020 by Bloomberg. Since then, the bank has increased exposure to the carbon credit marketplace. Last July, for example, Dimon said that “Timber assets is [sic] going to be a great thing for asset management,” referring to a lumber company named Campbell that JPMorgan Chase purchased weeks earlier. The bank acquired Campbell “to gain a foothold in the growing market for forest-carbon offsets,” according to Markets Insider.
According to the The Weather Channel, despite the indifference of top bankers to urgent calls for fossil fuel divestment, the frequency and cost associated with weather-related natural catastrophes have increased over the past 40 years due to climate change. National Oceanic and Atmospheric Administration.Data gathered from bank regulators also shows evidence that climate change is having an increasing impact on the financial industry. When banks have branches in disaster areas, agencies grant regulatory relief. They cite the difficulty people in disaster areas face in staying current with their bills. An analysis by TruthoutThe FDIC has issued more regulatory relief orders after weather-related catastrophes than ever before. This is evident from the graph below. Between 2001 and 2021, the FDIC issued approximately 5.1 times more annual weather related relief orders. The same period saw similar measures for tornado-related and flood-related orders go up by 10.5 percent and 9 percent respectively. 2009 was the last year that there was no tornado-related disaster assistance order. 2006 was also the last year that there was no disaster relief order that focused on flooding. The five-year moving average of fire-related relief orders hasn’t decreased since 2010 and was up from 0 to 1.4 between 2001 and 2021.
Moving averages represent the mean of a subset or data. They are intended to smooth out short-term fluctuations in order to highlight longer-term trends. A spokesperson for the FDIC explained that the agency’s discretion has nothing to do with the increase in relief orders, which are based on disaster declarations by the Federal Emergency Management Agency.
While critics are calling for more from financial regulators, powerful conservatives are outraged that agencies are not doing anything. Republicans on the Senate Banking Committee urged the Federal Reserve last year “to refrain from taking any additional actions with respect to climate-related risks.” The top Republican on the committee, Pat Toomey (R-Pennsylvania), is fond of assertingNo financial institution has failed due to extreme weather events or other uses in the last 50-years. reactionary dogwhistle to malign regulators interested in addressing climate risk, calling them “woke.”
Not only is Toomey’s assertion about bank failures incredibly vacuous — it’s built on the assumption that what has happened with weather events will happen again in the future, despite rising sea levels and higher global temperatures causing the intensity and frequency of such events to increase. Toomey’s claim also obscures damage that climate-related catastrophes have already done. Hibernia, a Louisiana bank, suffered a loss in 2005. $197.7 millionBecause of the damage caused hurricanes Rita/Katrina. Moreover, the threat isn’t limited to banks located primarily in areas prone to natural disasters.
“[T]wo-thirds of banks’ physical risk comes from the indirect economic impacts of climate change, such as supply chain disruptions and lower productivity, with coastal flooding (driven by sea level rise and stronger storms) representing the largest source of direct risk,” non-profit Ceres said in a reportPublished September 2021.
When asked to respond to Toomey’s remarks on bank failures and weather-related events, a spokesperson for the FDIC pointed to a statement made on October 3 by agency Chair Martin Gruenberg at a speech on climate changeThe American Bankers Association.
“These [climate]Trends are threatening the financial system’s future resilience. In some cases, individual banks may be at risk of being harmed by these trends. It is the goal of our work on climate-related financial risk to ensure that the financial system continues to remain resilient despite these rising risks,” Gruenberg said.
The FDIC spokesperson also said that it was too early in the rulemaking process to comment on the proposed language on banks’ public commitments. But if the Bank Policy Institute gets its way, the provisions — and regulators’ best shot at addressing the harm done by destructive fossil fuel industries — could fall by the wayside, and those who don’t profit from the destruction will bear the burden.
“Similar to financial institution action during the subprime mortgage crisis, financial institutions supporting fossil fuel-related activities are creating risks that other entities are left to deal with,” as Public Citizen noted.
