We see the act of signing the BankFWD pledge as a statement of readiness and commitment to further action – not an end in itself. Although the signaling power of a public signature can be valuable, significant and measurable change will be the result of direct engagement by bank clients with their financial advisors and bank executives; effective media exposure and attention; and the demonstration of large-scale demand for Paris-aligned banking practices through both client requests and the transfer of assets. After signing the pledge, signatories can access a toolkit of materials to support immediate action. In November, BankFWD will host a virtual Town Hall to educate signatories and facilitate the coordination of specific engagement strategies among fellow clients at specific banks.
Signatories will get access to a toolkit of materials for engaging with their bank(s), collaborating with fellow clients to organize joint meetings and efforts, and taking further action.
Recommended Next Steps:
- READ the Bank Backgrounder for your Bank(s)
- SEND a letter to your bank using the BankFWD template
- REQUEST a meeting with your asset manager or bank executive
- JOIN a bank-specific sub-group for collective efforts with your bank(s)
- RECRUIT new network members via personal outreach and social media
- SPEAK OUT publicly via op eds or open letters
- TRANSFER assets away from banks that fail to make sufficient progress
The Paris Agreement provides a framework for reducing climate risk globally on an achievable timeline. In December 2015, 195 member nations committed to reducing their carbon emissions 45% by the year 2030, with a goal of reaching net-zero emissions by 2050. The United Nations Framework on Climate Change (UNFCC) Paris Agreement pledged to take action that would limit global warming to 1.5° Celsius (2.7° Fahrenheit). The ultimate objective of this agreement is to stabilize greenhouse gas concentrations in the atmosphere at a level that will mitigate dangerous human interference with the global climate system, on a timetable that will allow ecosystems to adapt and develop naturally. Fossil fuels pose grave financial and climate risks to all countries and communities, and the window for action is closing rapidly.
The Paris Agreement is essential for reducing carbon emissions. However, the current U.S. administration has elected to opt out of the Agreement, necessitating and inspiring greater ambition at the global and sub-national levels. Many U.S. states and major cities have publicly committed to continued engagement with climate goals as outlined by the Paris Agreement.
Civic policy has been supplemented by action from private and non-governmental sectors. Since the U.S. withdrawal from the Agreement, mayors, governors, and business leaders across the country have committed their specific resources to reduce emissions and address the root causes of climate change through pledges such as We Are Still In.
In the absence of adequate federal policy, responses from all sectors have become even more crucial. BankFWD addresses one specific aspect of this response by directly engaging with banks and their role in ending new fossil-fuel financing moving forward.
Bank clients are uniquely positioned to influence the policies of major banking and financial institutions. Banks have a vested interest in maintaining long-term relationships with their client base, particularly their high-profile and high-net-worth clients, whose aggregate networks and accounts represent a sizable portion of their overall business. Additionally, the visible support or rejection of banking policies by a significant client constituency represents a powerful lever for influencing banks towards adopting Paris Agreement-aligned policies. BankFWD helps bank clients exert financial and reputational pressure on major banking institutions to urge climate progress.
BankFwd will support bank clients and their affiliated, privately-held companies and foundations to:
- Ask their banks’ executives – in letters and/or in-person meetings – to phase out financing of fossil fuels, align with the 1.5° target of the Paris Agreement, and lead the transition to a just, zero-carbon economy.
- Author or co-sign open letters or op-eds addressed to bank CEOs that amplify this core ask.
- Advocate for policies and initiatives to combat climate change, and spread the word about BankFWD.
- Engage networks to identify other aligned bank clients and partners.
- Actively support climate-leader banks, and transfer assets away from banks that fail to show sufficient progress.
There are a number of recent bank announcements that point to momentum regarding public pressure and policy shifts.
JPMorgan Chase announced that it will replace Lee Raymond, the former chief executive and chairman of ExxonMobile, as the lead independent director on its board, following protests by both investors and climate activists.
Goldman Sachs announced in 2019 that it would restrict its lending to the coal industry, and not pursue funding for drilling of the Arctic, following the sustained activism of a coalition of groups, including the Gwich’in tribe of the Arctic National Wildlife Refuge, the Sierra Club and Rainforest Action Network.
In 2019, French giant Crédit Agricole announced that it would no longer do business with companies that are expanding their coal operations and that existing clients from developed nations must formulate an exit strategy from the industry by 2030 (with specific further dates enumerated for Chinese companies, followed by all companies globally).
UniCredit announced it would halt all lending for thermal coal financing by 2023, while BNP Paribas said it would stop financing the thermal coal sector in the European Union by 2030 and by 2040 worldwide.
Barclays no longer provides project finance to any new coal-fired power plants or expansion for existing plants.
Such decisions can be credited in large part to pressure from environmental NGOs, such as BankTrack, who challenge banks to sever all ties to utilities still developing new coal-fired power plants.
Beyond the banking industry, in 2019 Liberty Mutual became the first major U.S. insurance company to announce it would limit its underwriting of coal companies. The announcement came after sustained pressure from a coalition of environmental groups called Insure Our Future.
Bank clients, particularly high-profile and high-net-worth bank clients, are uniquely positioned to influence the direction of banking policy, not only as significant account holders, but as influential individuals with the capacity to contribute meaningfully to public pressure campaigns. This capacity only expands as the number of bank clients publicly committed to the BankFWD initiative increases. Reputational risk is an underutilized lever for driving banking policy change, and BankFWD seeks to engage its network to further apply this vital influence.
To be a Paris-aligned bank, as outlined in the Banking on Climate Change report:
The bank must align its own overall climate impact with, at minimum, the IPCC P1 1.5°C pathway. This should encompass lending, underwriting, asset management, and other services. To do so requires measuring and disclosing climate impacts and setting targets based on that assessment.
The bank must ensure that the projects and companies it supports are themselves aligned with 1.5°C:
- No project that expands extraction of fossil fuels, or expands infrastructure that drives expanded extraction, is compatible with 1.5°C. It follows that exploration for new reserves is also incompatible with the 1.5°C pathway. Any existing fossil fuel project must plan to wind down operations on a timeline aligned with, at a minimum, the IPCC P1 1.5°C pathway.
- No company that expands fossil fuel extraction or infrastructure, or conducts exploration for new reserves, is compatible with 1.5°C. Any fossil fuel company must plan to wind down fossil fuel operations on a timeline aligned with, at a minimum, the IPCC P1 1.5°C pathway.
Banks routinely claim that financing for fossil fuel companies facilitates their accelerated transition towards climate alignment. Banks must be transparent about the basis for these claims so that they, and their clients, can be held accountable. They must make explicit what they are requiring of fossil fuel client companies, and what consequences will be triggered by failing to meet those requirements on a timeline aligned with, at a minimum, the IPCC P1 1.5°C pathway.
In the absence of federal climate policy to regulate carbon emissions, limiting the availability of financing for new and existing fossil fuel projects is the most impactful way to move the world towards a trajectory aligned with the Paris Agreement’s 1.5° target.
A significant reduction in funding for fossil fuels would:
- Increase the cost of capital and project development timelines for fossil fuel projects. Over time, these projects become too expensive, too complicated and are subsequently abandoned. A recent, highly-visible example is the cancellation of the Teck Resources oil tar sands project in Canada.
- Send price signals that incentivize the growth of the clean energy economy.
- Remove the social and political license of banks and other corporations to ignore the financial and humanitarian urgency of climate change.
- Normalize the Paris-alignment of corporate policies.
- Encourage international, federal and state policymakers to commit to similar alignments.
Since the Paris Agreement, Major U.S. banks have increased financing for fossil fuel projects – the greatest source of human-caused carbon emissions – by $2.7 trillion dollars. Absent coherent federal policy, banks will not shift these policies without significant pressure. In the absence of decisive regulation or vocal account-holder dissatisfaction, banks will continue to fund the fossil fuel industry at record levels.
Major banks and financial institutions are the lifeblood of the fossil fuel industry, facilitating the continued growth and expansion of fossil fuel projects and operations that will make achieving the Paris Agreement’s targets impossible. Since the adoption of the Paris Agreement (2016-2019), 35 private-sector banks to the fossil fuel industry, have provided a collective USD $2.7 trillion to fossil fuels.
Among these banks, BankFWD is primarily focused on changing climate-relevant policies at JPMorgan Chase (JPMC). JPMC is the world’s top financier of the fossil fuel industry by a wide margin, accounting for 36% more financing over the past four years than the second-highest fossil fuel funder, Wells Fargo. JPMC became the first bank to pass the quarter-trillion dollar mark in post-Paris Agreement fossil fuel financing, allocating $269 billion between 2016-2019.
JPMC is the leading Wall Street bank in performance terms and its peers look to it as a standard-setter across a number of issues, including climate. U.S. banks are likely to take action on climate in clusters, and changes by JPMC will be a crucial catalyst for action across the whole sector. For these reasons, the wider climate movement has identified JPMC as the primary focus of climate efforts. JPMC also has a long-standing personal history and ongoing client relationship with the Rockefeller family, of which BankFWD’s co-founders and co-chairs are all members.
BankFWD is asking banks to commit to phasing out the financing of, and investment in, those fossil fuel companies which do not have a credible strategy to do business in a world where global warming is limited to 1.5°. Note that this is not all fossil fuel companies, but rather those which are not appropriately planning for a warming future.
This is an ambitious ask, but it is a reasonable one, with early momentum and policy announcements among European banks and major banking systems globally. U.S. banks must follow suit in order to achieve the aims of the Paris Agreement within an acceptable timeline.
Curtailing bank funding of fossil fuel banks will significantly impact the ability of fossil fuel companies to raise capital. Similar strategies have proved overwhelmingly successful in recent years, including a campaign to shift banking policy on coal companies. According to the International Energy Agency “the cumulative impact of multiple decisions can also be very significant: one bank moving away from coal has little impact, but when one hundred banks decide not to finance coal, it is far from irrelevant…”.
One hundred banks have not yet committed to “moving away” from fossil fuels, but momentum is building quickly. Regular climate announcements by European companies and banks continued through 2019 and into 2020. If a major U.S. bank were to make a significant move, this would accelerate change among other financial institutions.
Even incremental moves – such as those of Goldman Sachs and BlackRock – will, in turn, send signals to fossil fuel companies deciding on a multi-year strategy.
Starting with a carbon budget of 1.5°, analysis shows that the world’s current reserves of fossil fuels take us beyond safe climate limits. No more fossil fuels can be added to the global reserves.
Yet, many fossil fuels – including oil – are geopolitically vulnerable commodities, making immediate divestment complicated. Oil and gas companies will be needed, to a degree, as the world moves more fully to a stable, scalable, green economy. Finally, many fossil fuel contracts have multi-year terms, making an immediate end to financing impractical for major lenders.
Thus, BankFWD is asking major banks to commit to phasing out financing of, and investment in, those fossil fuel companies which do not have a credible strategy to transition in line with limiting global warming to 1.5°. The immediate action required is a commitment to this alignment followed by a gradual, but total, phase-out.
Banks generate revenue from the interest rate margin and management fees on loans, as well as significant underwriting and advisory service fees from equity and bond issues. In simplified terms, this makes loan repayment and fee accrual more important for the lending bank’s bottom line than the loan recipient company’s overall performance or S&P 500 placement.
Mark Carney, the Governor of the Bank of England, stated to Parliament that the average loan book horizon of a UK bank is four years. This has broad implications for the assessment of fossil fuel companies as sound sources of revenue in the short term versus high-risk in the longer term
While no big U.S. or international bank is currently aligned with the Paris Agreement, some smaller U.S. banks are, including Amalgamated Bank, Aspiration Bank, and Beneficial State Bank. Each has committed to aggressive plans to deeply curtail fossil fuel financing, and to make responsible climate banking a priority of their business models and investment strategies.
These policies include 100% fossil fuel free portfolios and significant investment in the renewable energies sector, therefore aligning with the commitments of the Paris Agreement.
Further, each of these banks has committed to the PCAF standards, signaling a commitment to monitor and disclose their institutions’ financed emissions. For easy reference, BankFWD has prepared background management emissions documents summarizing the climate positions (and lack thereof) of the six biggest U.S. banks. To request one or more, please email firstname.lastname@example.org.
Bank for Good is a valuable resource for individuals looking to find a bank that is socially responsive on a variety of issues.
For more information, including background memos specific to the climate policies of each of the U.S.’ six big banks and letter templates for engaging directly with your financial institution, please email our team at email@example.com.