Since the Paris agreement was signed in 2015, banks have invested more than $3.8 trillion in oil, gas, and coal production.
By Deanna Noel
In a terrifying end to 2021, a fire-storm ripped through residential neighborhoods outside of Boulder, Colorado, an event scientists say was “climate-enabled and weather driven.” The images of subdivisions in flames and smoke-filled gridlock along evacuation routes were yet another sobering example of an unfolding climate crisis. Slow-moving disasters like mega droughts are forcing families around the world to relocate as more of the world becomes an untenable habitat for humans. The western U.S. faces a similar fate. Down South, more frequent and extreme weather events like back-to-back hurricanes Matthew (2016) and Florence (2018) have forced small towns to grapple with the prospect that they may never rebuild.
In addition to the human impacts, disasters like these place an incredible financial toll on our communities and economy. Thankfully, federal bank regulators have a mandate to protect the safety and soundness of our economy, banks, and the financial system. That mission includes mitigating threats related to climate change, yet up until recently, these regulators have failed to act.
Despite clear science and an international mandate to limit warming to 1.5℃ to avoid a climate catastrophe, banks continue to funnel trillions of dollars towards a dying industry that is driving climate change. Since the Paris agreement was signed in 2015, banks have invested more than $3.8 trillion in oil, gas, and coal production.
There are two main types of climate-related risk to banks and the financial system—the numerous, enormously expensive, disruptive harms from the climate crisis itself and the risk that individual banks or the system will destabilize when markets suddenly panic and start selling off fossil fuel assets.
By pouring money into fossil fuels, banks are actively inflating both types of risk. Bank regulators should not just stand by and watch this happen. And banks should be moving in the opposite direction.
Big banks are financing climate chaos.
Some banks, feeling the heat from escalating public pressure, have announced net-zero greenhouse gas emission goals by 2050. JPMorgan Chase, one of the biggest U.S. banks, made the pledge. However, JPMorgan Chase continues to be the largest financier of fossil fuel expansion. This is a glaring shortcoming in direct contrast to the scientific community’s conclusions that, in order to protect our planet from climate collapse, we must eliminate all new fossil fuel development.
Although any serious climate-mitigation plan requires action now, with near-term targets for reducing emissions, a bank executive was recently quoted in private saying that net zero commitments are the “next, next, next, next management’s problem.”
Even the best policies fall far short. While the recent policy by Citigroup goes a step further than most by committing to meet absolute emissions targets in some sectors, the bank’s glaring omission is that it does not commit to end support for fossil fuel expansion immediately.
It is far too late for empty climate commitments.
A U.S. banking regulator has now taken a major first step toward exercising its authority to manage climate risk. It recently issued the first-ever draft guidelines outlining how it expects banks to manage climate-related risks. The public now has a chance to weigh in through February 14, 2022.
This is an important step to hold banks accountable for risky and reckless behavior that undermines their own stability and that of the broader economy while exacerbating the climate crisis. It places threats from the climate crisis squarely within the bounds of financial risk that banks and their regulators must manage.
Importantly, the document tells banks not to greenwash: it says that if a bank makes a public commitment to climate action, then the commitment should be reflected in the bank’s internal strategies. Federal regulators must use the full extent of their authority to hold banks accountable to their climate commitments.
Regulators make another key point as well: vulnerable populations, particularly Black, brown, and low-income communities, are at risk from banks changing their practices. The guidance direct banks to consider how their efforts to manage climate risks will impact already-marginalized communities—and remind them that such impacts could raise legal concerns. Banks can’t save their own profits at the expense of these communities.
If we’re going to begin to hold banks accountable for the damage they’re done to our economy and climate, we need your help. Right now, industry interests are lobbying regulators to weaken this proposal. Take action today and demand big banks do more than just greenwash: it’s time they do their part to address the climate crisis.