Overview

Last week, investors at Citigroup, Wells Fargo, Bank of America, and Goldman Sachs supported motions proposing that the companies discontinue any more financing for fossil-fuel projects. Every one of the proposals failed horribly, with hardly more than 10% of the support.

Regardless of the defeat, the votes were remarkable examples of a strategy local weather activists are employing with increasing zeal: pressing establishments from within to adopt substantial climate change measures. It’s one that showed some signs of success at vitality firm shareholder conferences last year, and it’s one that advocates like Kate Monahan, director of shareholder advocacy at Trillium Asset Management, an investment that funded the local weather decision at Bank of America on Tuesday, believe will eventually bear fruit more broadly.

She said she’s confident that we’ll be able to build the support over time. “It is a whole new type of proposition. So, 11 percent, I feel, is an excellent foundation to build on over the next 12 months. The stepwise approach required by this technology may appear vexing, given the scientific agreement that the world should stop funding new fossil fuel development immediately. However, there is reason to believe it will influence the end.

The current shareholder drive has its origins in the divestment movement, which saw environmental campaigners make the argument to a conservative audience of financial institutions, colleges, and state pension systems that they should withdraw their interests from fossil fuel businesses. After a decade and a slew of failures, high-powered gamblers backed down, along with Norway’s sovereign wealth fund, Harvard University, and New York State’s pension scheme. The global fossil-fuel divestment movement now represents over $40 trillion in assets.

Various firms, including the world’s biggest asset manager, BlackRock, have publicly disclosed promises to link their assets with climate change aims. That success has prompted the organizations supporting this week’s resolutions, such as the environmental organization Sierra Membership, and the asset managers Harrington Investments and Trillium, to adopt audacious pressure campaigns at their annual shareholder conferences.

The largest institutional shareholders at large banks are wary about this latest proposal to halt new fossil-fuel financing immediately. Part of this is because the marketing effort hasn’t yet reached the same level as the divestment movement.

The long road to changing the conversation about banks’ roles in funding a natural disaster

Every one of the banks with discussions this week (as well as JPMorgan Chase and Morgan Stanley, which already have shareholder votes coming up in the coming months) joined a coalition at this fall’s local weather conference in Glasgow to coincide their financing with achieving net-zero greenhouse gas emissions by 2050. Regardless of that guarantee, the same banks continue to support fossil fuel expansion, implying that they are not aligned with these longer-term goals.

Loren Blackford, head of Sierra Membership’s investment committee, observed, “Now we get to see the insurance plans that can truly make it happen.” To that end, Sierra Membership’s suggestion (like the others from the last week) asked Goldman Sachs to make “proactive efforts to ensure that the agency’s lending and underwriting operations do not contribute to the new fossil gasoline growth.”

It argued two points: that Goldman Sachs’ “predominance in affirming local weather management contradicts its actions, posing a reputation risk from accusations of greenwashing,” and that the bank is jeopardizing its long-term stability and benefits by pouring cash into a dying business, “knowingly loading possibly stranded possessions onto its purchasers’ steadiness sheets, posing a litigation risk.”

According to the Banking on Climate Chaos study, huge banks have continued to subsidize fossil fuel growth: in the previous year alone, Citigroup, Wells Fargo, Goldman Sachs, and the Financial Institutions of America spent approximately $137 billion on fossil fuel programs. (In 2021, JPMorgan Chase alone spent more than $61 billion on fossil fuels.)

There seem to be a few reasons for this.

One is that, regardless of what their language says, banks are inextricably linked to fossil fuel companies. According to the Banking on Local Weather Chaos study, the 60 largest banks spent approximately $4.6 trillion on fossil fuel investments for the 2015 Paris climate agreement and $742 billion in the previous year alone. The epidemic demonstrated how vulnerable banks are to unpredictability in the oil market. When worldwide oil demand fell in 2020, major banks like JPMorgan lobbied for federal stimulus on behalf of oil companies.

Local weather activists think that the only way to avoid similar effects is to prevent new financing in the field. Financial institution boards disapprove so much that they have petitioned the Securities and Exchange Commission (SEC) to halt this week’s voting. So when the SEC did not interfere, the boards launched an anti-proposal campaign. Goldman’s board of directors just announced that it is dedicated to the six-year-old Paris climate objectives. “We do not foresee that limiting producer finance would result in either a decrease in emissions or a drop in demand for fossil fuels,” they said.

Another difficulty is the present upheaval in the energy market, which is caused by Russia’s involvement in Ukraine. That gave any local weather proposal a tough sell to major asset managers who’re concerned about their bottom line.

The importance of influencing the wealthiest businesses proudly owning the stock at any given meeting, particularly organizations like BlackRock and Vanguard, cannot be overstated. These two asset managers endorsed local weather initiatives at vital businesses in their last year, ensuring their success. And, while BlackRock and Vanguard haven’t revealed their choices from this week, given the final results, it’s expected that they didn’t help the 2022 initiatives. Bringing BlackRock on board, as well as pension funds and other major asset managers, would be critical in raising the stakes for financial institutions.

Changing the bank’s approach

One is that the strategy of capturing a large corporation’s attention at general shareholders’ meetings is not especially novel, and success does not necessarily rely just on obtaining a majority. In 2019, for example, environmentalists sought to persuade Goldman Sachs to cease funding Arctic oil drilling.

Another example is the success of climate campaigners at last year’s oil industry meetings. Chevron, ConocoPhillips, and Phillips 66 shareholders voted for greater transparency on climate preparation. ExxonMobil also lost three board positions to candidates sponsored by climate activists.

Finally, there is increasing support for increased corporate climate transparency and commitment. The Conference Board’s corporate governance researchers observed how the average vote for climate-related initiatives increased from 24 percent in 2019 to 32 percent in 2020. (The investor-focused nonprofit Ceres predicted another 10-point increase to 41 percent in 2021). Every year that flies means that the world falls short of its climate obligations.

But instead of playing it safe, campaigners are making bolder and greater commitments.

What do the protesters say?

Banks support moving from fossil fuels

And, while regular people’s efforts to reduce, recycle and reuse do add up, it is the whole system’s failures that are harming our future. If we’re looking for someone to blame, we should point our fingers at the businesses that benefit from these resources, notably huge banks.

Since 1988, only 100 corporations have been accountable for much more than 70% of global greenhouse gas emissions. However, fossil fuel businesses cannot damage the earth without outside assistance, and they receive a lot of it. Banks lend money to fossil fuel firms so that more coal, oil, and gas can be produced; pipelines can be built, and far more than what can be deposited in the coffers of a few corporate leaders can be produced.

They exposed the world’s largest banks in this Banking on Climate Change analysis as actively fueling the climate disaster. 35 banks have invested $2.7 trillion in fossil fuels since 2016. Big banks have failed spectacularly in their response to the climate catastrophe. Fossil fuel finance is killing the environment, and global banks are boosting investment in filthy energy despite every logic, compassion, and awareness of Indigenous rights.

Who’s the number one?

Banks must assume accountability and play a significant role in commencing the fair transformation away from relying on fossil fuels, and we must press such banks to take the required steps. So we began with the largest and worst of all: JPMorgan Chase.

In reality, Chase is by far the world’s worst banker of climate disaster. In the last four years, Chase has poured nearly a quarter-trillion dollars into fossil fuels, fueling the fires of climate disaster.

To put this in context, Chase’s entire financing of fossil fuels from 2016 to 2019 was 36% greater than the second-placed bank, Wells Fargo.

Furthermore, JPMorgan Chase’s $102 billion in financing for fossil fuel growth represents 43 percent higher than that of Citi, in distant second place.

Chase is a supporter.

Chase has been a continuous bad actor, sponsoring projects that damage the environment as well as violate human rights, notably indigenous rights.

Indigenous peoples are some of the first and most severe victims of climate change. At the very same time, they are now at the vanguard of global campaigns to safeguard land, air, and water again from the effects of fossil fuel production.

Indigenous peoples have led the fight against major fossil fuel proposals that would result in decades more of fossil fuel growth, from the Trans Mountain pipeline to the Coastal GasLink pipeline to the Keystone XL pipeline. People have been standing up against the causes of climate catastrophe and the plunder of land for environmental assets.

Banks that assist the fossil fuel industry have a duty to avoid financing projects and corporations that breach Indigenous rights, including the right to obtain free, prior, and voluntary participation in development that affects them. Unfortunately, JPMorgan Chase and other banks have financed firms such as Enbridge, which is attempting to build the Line 3 tar grains of sand pipeline over the clear objections of impacted Indigenous nations.

Chase must prioritize people and the environment over profits, as well as respect Indigenous agreements and rights.

The solution

To address the underlying impacts of global warming, we must halt the extraction and combustion of fossil fuels while also preserving our forests. To do so, we must persuade financial institutions like Chase to cease supporting these projects and businesses once and for all.

And, to be clear, Chase can change direction. Throughout RAN’s history, we’ve witnessed big businesses and banks shift their focus to initiatives that prioritize people and the environment before profit. They could not only do it, but it is also necessary to assure a viable future.

And that is already taking place. Because of the demand from RAN backers and partners, Chase issued a revised fossil fuel strategy in February 2020. Chase has reduced its coal investment, abandoned Arctic oil and gas investments, and ousted Lee Raymond, a well-known climate change skeptic, from his senior place on the board of directors. However, the latest climate legislation falls well short of what is required to avert the global calamity that Chase has been funding for decades.

Disclosure

These are purely the opinions of the author based on observations and analysis of financial platforms and a study of public reviews and ratings on the long journey to convince major banks to move away from fossil fuels and what the campaigners think about this. Excerpts from various sources have been used to clarify the facts in this article. A glossary of all the sources used can be found at the end of the article. This article is for educational purposes only and is not financial advice.