Week of 5 October 2020
JPMorgan Chase, which has the largest loan exposures to fossil fuel companies of any bank, committed to setting greenhouse gas emissions targets for its portfolio in line with the 2015 Paris climate agreement. This move comes as climate activists, consumers and regulators put pressure on financial actors to take action on climate change, and signals a growing momentum towards financial sector accountability for the environmental and social impacts of their investments and loans (JPMorgan Chase)
Earlier this week, JPMorgan Chase announced that it would commit to setting greenhouse gas emissions targets for its financing portfolio in line with the targets set by the 2015 Paris climate accords.
The decision comes after climate activists (including Jane Fonda on behalf of climate advocacy coalition Stop the Money Pipeline) put pressure on JPMorgan Chase to address its contribution to climate change through its financing. As reported by the Wall Street Journal, “JPMorgan has some $40 billion in lending exposure to oil-and-gas companies, and the Rainforest Action Network considers it the world’s biggest financier of fossil fuels.” The below table from the Financial Times shows that JPMorgan is the bank with the largest loan exposures to fossil fuels (as of 2016):
Source: Billy Nauman, JPMorgan Chase promises to shift portfolio away from fossil fuels, Financial Times (6 October 2020)
JPMorgan Chase’s New Commitment
At a high level, JPMorgan Chase has committed to:
- Set “intermediate emissions targets for 2030 for its financing portfolio and begin communicating about its efforts in 2021.” JPMorgan will focus on the oil and gas, electricity and automotive sectors, and the exact target will vary according to the sector;
- Over the longer term, “aim to support companies to advance the goals of Paris, including reducing GHG emissions and expanding investment in low- and zero-carbon energy sources and technologies”;
- “Continue to advocate for market-based policy solutions” like carbon pricing and the commercialization of decarbonization technologies;
- Measure investees’ carbon intensity (ratio of emissions relative to unit of output) and work to address Scope 3 emissions for sectors that have the highest emissions in the supply chain; and
- Engage with clients and stakeholders to “strengthen the comprehensiveness and quality of [climate-related] data reported.”
JPMorgan Chase is also launching the Center for Carbon Transition (“CCT”) “to provide clients in the Corporate & Investment Bank and Commercial Banking with centralized access to sustainability-focused financing, research and advisory solutions. The CCT will also engage clients on their long-term business strategies and related carbon disclosures.”
What this means in context
- JPMorgan’s commitment is significant because it is another example of pressure that is growing on financial actors to play a role in meeting the 2015 Paris Agreement, including by engaging with, or divesting from, high-emitting companies.
- Other banks are moving in this direction. For example, last week 55 banks (including HSBC, BNP Paribas, and Société Générale) committed to setting climate goals for their portfolios in line with the Science Based Targets Initiative framework, which is based on the targets of the Paris climate agreement (i.e. limiting the global temperature increase to no more than 1.5 degrees Celsius).
- In recognition of the financial risks posed by climate change, governments and regulators are also exploring climate-related financial disclosure requirements for financial actors, most recently in New Zealand and in the United States. In New Zealand, the proposed law is based on the Task Force on Climate-related Financial Disclosures’ 2017 framework for disclosures, which asks companies and investors to share information about governance of climate risks, strategic climate risks and opportunities, risk management processes, and metrics and targets.
Some members of the Stop the Money Pipeline coalition welcomed JPMorgan’s commitment, but said it was not ambitious enough to meet the urgent climate crisis. A few of their responses are shared below:
- Alec Connon, the Stop the Money Pipeline Coalition Co-Coordinator, said, “Today’s announcement is significant. The world’s largest lender to the fossil fuel industry has clearly signaled that the fossil fuel game is coming to an end. However, if Chase is serious about its climate commitments, it’ll need to quickly follow this up with policies that prohibit all lending to coal companies and companies still expanding fossil fuel production. 2050 vision is all well and good, but we need 2020 actions.”
- Dallas Goldtooth of the Indigenous Environmental Network, said, “These are not goals to mitigate climate chaos, this is the continuation of the status quo for as long as possible. Chase’s announcement utterly fails in addressing climate chaos. By promoting net-zero emissions, Chase bank is supporting false solutions that will continue to put Indigenous peoples and lands in the bullseye for attack. This is unacceptable.”
- Bill McKibben, Co-Founder of 350.org, said, “The biggest bank in the world, in the face of the biggest crisis in the world, has begun to bend to the biggest movement in the world. Chase must move much farther and much faster, and we will do our best to prod them in that direction!”
- Sierra Club Senior Campaign Representative Ben Cushing said, “The fact that the world’s biggest funder of fossil fuels feels compelled to make a pledge like this is a testament to the power of the movement pushing financial institutions to clean up their act on climate. … Chase’s climate pledge is an important step forward, but it’s severely insufficient to meet the scale of the climate crisis and Chase’s outsized role in driving the destruction that’s already underway. As long as Chase is still pouring billions of dollars into the dirty energy sources that hurt our communities and push the climate past catastrophic tipping points, a vague pledge for action doesn’t cut it.”
Daniel Pinto, Co-President of JPMorgan Chase and CEO of JPMorgan’s Corporate & Investment Bank, JPMorgan Chase Adopts Paris-Aligned Financing Commitment (6 October 2020)