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 net zero emissions by 2020. “The architecture of the global financial system has been transformed to deliver net zero,” statedCarney as he revealed 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. This is a problem.
One study found that 71 percent of all of history’s greenhouse gas emissions come from just 100 fossil fuel companies. Not only this, but fossil fuel companies have spent 40+ years in the business of fossil fuels. funding climate denialAnd waging warEven incremental proposals to combat climate change are strongly resisted.
It’s like trying to put out a flame without doing anything to stop people from lighting gasoline on it. That seems to be what the financial sector is doing. This is evident more than anywhere else, including 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 trillionto the fossil fuel industry. Consider that $1.2 trillion is more then twice the current share price of ExxonMobil Chevron and BP.
Despite their close ties to fossil fuel industries, every major U.S. bank signed on to the Glasgow Financial Alliance For Net Zero and committed themselves to net zero emissions by 2020. They have yet to stop supporting the industries that contribute the most to the climate crisis. They appear determined to do the contrary. David Solomon, CEO of Goldman Sachs, recently spoke out. vowedChase CEO Jamie Dimon stated that he will continue to provide finance for the oil and gas industry. 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. Chase chose to reuse, rather than reduce overall greenhouse gas emissions related to its lending. 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 wells. Chase grants you a loan of $10 billion. The loan is used to purchase 400 additional oil wells and 400 more windmills. This means that your contributions to climate change have increased 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.
Morgan Stanley became the second U.S. Bank to release 2030 climate targets during COP26. announcing a planTo reduce emissions in the energy, automotive 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, which directs federal regulators to analyze climate change and mitigate its impact on the economy.
In response, the Financial Stability Oversight Council (FSOC), the federal government’s most powerful financial regulator, released a reportThis article outlines what the climate crisis should look like for the financial sector. FSOC stated that U.S. financial regulators believe the climate crisis is real, but it was not true., Although they have the power and obligation to address climate change, the report fails in many key areas. 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.
Greater hope is available the Fossil Free Finance Act. The Fossil Free Finance Act, introduced last fall by Representatives Mondaire, Rashida, and Ayanna, would prohibit funding new fossil fuel project funding by 2022, and all fossil fuel project funding by 2030. It is legislation that meets the scale and urgency of the climate challenge — which is, of course, exactly what is required.
Yet, 22 members of Congress have so far voted. signed on to co-sponsor the Fossil Free Finance Act. If our elected officials are serious in addressing the climate crisis, they must be able to increase their numbers dramatically by 2022.