Over the past several years, there has been a growing focus on the role of banks in driving the climate crisis. As climate change intensifies, so too have the calls to hold the world’s largest banks accountable for their climate impacts.
A new report by the Sierra Club’s Fossil-Free Finance campaign takes a look at the climate commitments of big US banks, where those banks are falling short, and what they must do to align their financing with global climate goals.
In response to growing pressure and insurmountable scientific evidence, many of the world’s largest banks have pledged to align their financing with the Paris Agreement by reaching net-zero emissions by 2050. (Put simply, this means cutting banks’ financed greenhouse gas emissions to as close to zero as possible.)
The six largest US banks have made this commitment: JPMorgan Chase, Citi, Wells Fargo, Bank of America, Morgan Stanley, and Goldman Sachs. In addition, all six banks joined a global voluntary climate initiative called the Net Zero Banking Alliance, which convenes banks committed to reducing their climate impacts. But even as the big US banks pledge to align their financing with global climate goals, there remains a serious gap between their words and their actions.
No new fossil fuel financing
According to the world’s preeminent climate scientists and energy experts at the International Energy Agency (IEA), if we want to meet our global climate goals, we must rapidly and dramatically decrease our greenhouse gas emissions, and there must be no additional investment in new fossil fuel supply. This finding is critical because it means new fossil fuel development is fundamentally incompatible with meeting global climate goals—and indeed, with the goals set by the banks themselves.
Despite repeated warnings about the need to phase down fossil fuels, US banks lead the world in financing fossil fuel expansion. In fact, the top four banks in the world pouring the most money into financing fossil fuel expansion are US banks.
US banks provide billions of dollars to the world’s largest fossil fuel expanders, like ExxonMobil, Saudi Aramco, and Venture Global, the oil and gas giants behind some of the most dangerous and destructive fossil fuel projects in the world. And these US banks aren’t slowing down anytime soon. Just a few months ago, when asked if the bank would stop financing new fossil fuels, JPMorgan Chase’s CEO Jamie Dimon claimed doing so would be the "road to hell for America.”
Thus far, major US banks have repeatedly undermined their own climate commitments, and they have a long way to go to align their practices with their stated climate goals.
How US banks stack up
Though all six big US banks have failed to commit to phasing out financing for fossil fuel expansion, there are other indicators that can help assess banks’ overall progress toward their net-zero goals. Most notably, these include the interim targets for 2030, and the financing policies that guide business practices in high-risk sectors.
Big US banks have taken some promising first steps in their net zero by 2050 journey. All six set interim targets to reduce emissions from the financing to two high-emitting sectors: oil and gas, and power generation. In addition, all six banks committed not to provide financing for new oil and gas projects in the Arctic, or new coal projects.
However, not all targets and policies are created equal. For example, Wells Fargo and Citi have the most ambitious reduction targets for the oil and gas sector. For the coal sector, all six banks have policies to restrict financing for new coal projects, but Citi is the only bank with a policy to phase out financing for coal-fired power companies.
While these commitments are a good first step, across the board, US banks are falling far behind what is needed to meet their own net-zero goals. As written, their targets and policies are weak and riddled with loopholes, which allow billions of dollars to flow into new fossil fuels projects each year. If banks want a fighting chance at meeting their net-zero goals, they must raise the ambition of emissions reduction targets, strengthen energy financing policies, and eliminate loopholes.
Transition plans
Among the most essential elements of robust transition plans for US banks:
- Committing to phase down financing for companies expanding fossil fuels, while not limiting exclusion policies to individual projects, but including full companies as well. For example, banks should adopt policies to phase down financing for companies like ExxonMobil, Shell, and Saudi Aramco, which are leading massive fossil fuel expansion around the world.
- Setting targets for reducing financed emissions on an absolute basis in the oil and gas sector. Currently, most major US banks set intensity-only targets, which allow them to continue to increase their financing for the oil and gas sector. Absolute reduction target would require a decrease in financing for the entire sector, and allow the bank to actually meet its climate goals.
- Setting targets that cover the entire value chain of high-emitting sectors. This ensures that banks will have to reduce financing across the full range of activities in sectors like oil, gas, and coal.
- Improving the quality of their data disclosures to provide more transparency on their methodologies and key assumptions. This is essential in order to provide insight into how banks determine their climate targets, and allows us to understand their progress toward achieving them.
The coming year will be pivotal in determining our shared ability to curb catastrophic climate impacts. It is incumbent on the world’s largest banks, and especially big US banks, to lead the financial sector as it moves away from dangerous, climate-warming fossil fuels to a greener, low-carbon economy.