For years, banks have argued that to drive the energy transition, they need to preserve relationships with major energy companies. They insist that continuing to finance fossil fuel companies is not contradictory to their climate commitments. But in a year of record windfall profits, oil and gas companies refused to invest in renewable energy, spending the cash on share buybacks and shareholder dividends instead.
It wasn't long ago that global companies tried to outdo each other for the splashiest climate commitment. Oil companies like BP and Shell pledged to slash emissions and invest in green energy. Banks joined the frenzy leading up to COP26, where
But in the past few months, the picture has looked different. A year into Russia's invasion of Ukraine, oil companies are cynically using the war to justify fossil fuel expansion and
Needless to say, oil companies aren't strapped for cash. Despite unprecedented windfall profits, the annual Banking on Climate Chaos report reveals global banks showered fossil fuel corporations in cash, pouring
Amid 2022's windfall profit bonanza, many oil companies, which borrowed billions over the last six years, borrowed nearly nothing in 2022. Occidental Petroleum enjoyed a
Banks could have used the last year to strengthen their climate commitments and mobilize clean energy transition financing. The war in Ukraine and subsequent energy crisis highlighted the need to transition to a more sustainable and less volatile energy system. Instead, banks failed to upgrade their climate commitments, and even
Major Wall Street banks JPMorgan Chase, Citi, Bank of America and Wells Fargo are the
No big U.S. bank has policies restricting financing for new fossil fuel expansion. This is a shameful distinction. While other global banks have strengthened their financing policies, no major U.S. bank has updated its energy financing policies since 2021.
Pro-union workers at a Wells call center allege that supervisors repeatedly tore down flyers, violating their right to organize. The bank said it refuses to "tolerate retaliation of any kind."
When pressed on their refusal to restrict fossil fuel financing, U.S. banks insist they need to preserve client relationships to finance the transition. This is true: To meet our climate goals, we need banks to
However, just
The fact is, banks aren't financing the energy transition like they claim to be, and their biggest energy clients aren't pretending to try. If banks want to actually support the clean energy transition, we need guardrails to ensure their financing isn't just perpetuating the status quo.
When banks say they can't restrict financing for major energy companies because it would stop them from financing the green transition, the argument falls flat. Thankfully, bank shareholders are waking up to that fact.
At this year's annual meetings of major U.S. banks, several
Roughly a third of investors voted in favor of proposals at JPMorgan Chase, Bank of America, Wells Fargo and Goldman Sachs asking the banks to publish transition plans to align their financing activities with their 2030 emissions reduction targets. These increasing calls from investors for better corporate disclosures are significant: They echo language on climate risk mitigation and corporate disclosures in the Securities and Exchange Commission's proposed climate risk disclosure rule, which should be finalized later this year, as well as new EU regulations on sustainability disclosures, which will take effect in the coming years.
The investor support for climate transition planning at banks should be seen as encouraging, but it's alarming that investors have mostly chosen a hands-off approach to more direct climate risk mitigation proposals. While increased disclosure is essential, it's only the first step. The fact is, we won't disclose our way out of the climate crisis. It's incumbent on the biggest shareholders — from major asset managers to public pension funds — to go beyond asking for transparency on business plans that may be lacking and instead vote for banks to adopt more robust policies and targets.
If their recent behavior is any indication, even in years of record profit, fossil fuel executives don't plan to pivot their business plans to prioritize the clean energy transition any time soon. If banks insist on maintaining relationships with energy companies, then the shareholders of big U.S. banks must ensure bank clients aren't putting their money — and our planet — at risk.
As the climate crisis worsens and fossil fuel financing continues, investors of big U.S. banks must move beyond calls for disclosure only and demand financial institutions take real steps to align their business practices with their stated climate commitments.
