Jun 19, 2016 by

CREDIT: Flickr user Objectif Nantes

Artist Isaac Cordal’s installation Waiting for Climate Change, Nantes, France, 2013

Last December, the world agreed in the historic Paris climate accord not to burn most fossil fuels. To do that, some of the lowest-hanging fruit is halting the investment of hundreds of billions of dollars into the most expensive and extreme fossil fuels: coal, Arctic oil drilling, tar sands, deep offshore drilling, and liquefied natural gas (LNG) export.

So how is the world doing?

“Needs improvement” would be putting it charitably, according to a new report looking at the world’s biggest private-sector banks, which are still funding the industries that drive climate change to the tune of hundreds of billions of dollars.

Shorting the Climate is the seventh edition of an annual report by Rainforest Action Network, BankTrack, Sierra Club, and Oil Change International that evaluates how exposed big banks are to the worst fossil fuel investments. In finance terms, “short-selling” means to bet on, or profit from, failure.

The researchers provided grades on bank involvement with coal mining, coal power, extreme oil, and LNG exports. They did this by examining the publicly available data associated with the 25 largest global private commercial and investment banks based in Europe, Canada, and the United States. They graded banks in each category A through F, reflecting “the degree of a bank’s alignment with the Paris Agreement’s 1.5° (or 2°) climate target.”

Amanda Starbuck, Climate and Energy Program director at Rainforest Action Network (RAN), told ThinkProgress that she was in Paris for the climate talks last year and found herself asking, “if we limit warming to 2 degrees C, what bank investments are going to prove to be bad investments?” The report went in “a really different direction this year” as a result of this new global dynamic. She said the big question is “which banks are effectively gambling that we’re going to fail” by investing in the fossil fuel industries that have to stay in the ground: coal power, coal mining, tar sands, deep oil, Arctic oil, and LNG.

“Too many banks are risking resources on unstable fossil fuel companies and exposing investors and customers to greater financial risks while financing dirty, dangerous projects that threaten our planet,” Cindy Carr, spokesperson for the Sierra Club, told ThinkProgress.

The results show that, through hundreds of billions in investments, some of the world’s top banks are helping lock the world into a high-emissions pathway that makes it extremely difficult to limit global warming to less than 2 degrees Celsius. In the last three years, banks have sunk $154 billion in the biggest coal-fired power producers, $42 billion in companies active in coal mining, $282 billion in businesses building LNG export infrastructure, and $306 billion into companies engaged in the most extreme forms of oil extraction.

From 2013-2015, 25 big banks poured billions into the fossil fuels that are most incompatible with a climate-stable world.

From 2013-2015, 25 big banks poured billions into the fossil fuels that are most incompatible
with a climate-stable world.

CREDIT: Shorting the Climate report

The report singled out Citigroup and Bank of America as “the Western world’s coal banks.” Bank of America, JPMorgan Chase, and Barclays were termed “the bankers of extreme oil and gas,” with a combined $89 billion in LNG and extreme oil extraction.

Investments like these only pay off if the world fails to curb global warming.

Starbuck said the big shock was seeing huge gaps in oil and gas when it comes to the “climate due diligence” banks should exert — yet noted that some progress has been made on coal in some of the largest U.S. banks. In fact, 10 of the largest American and European banks committed to cut their investments in coal mining last year, and some actually began to make some cuts — demonstrating that it is possible to shift funds relatively quickly.

“On the coal mining side, we’re encouraged to see banks are improving — we’re seeing these commitments to end investments in coal mining, banks are sticking to their word,” Starbuck said.

“Some banks are moving in the right direction by allocating investments in the clean energy economy that is rapidly outgrowing fossil fuel companies,” Carr said. “Banks that make those kinds of profitable and responsible investments stand a good chance of improving their grades, but none of the banks we have graded so far are there yet.”

The report’s executive summary “calls for a fundamental realignment of bank energy financing to end support for fossil fuel projects and companies that are incompatible with climate stabilization.”

There’s Now A Way To Find Out How Much Of Your Retirement Is Invested In Fossil Fuels

There is already a tool called Fossil Free Funds that people can use to check how much of their retirement funds have holdings in fossil fuels.

Many of the names on the report are recognizable consumer banks that millions of people interact with every day. What should they keep in mind the next time they talk to their bank?

“This is a healthy guide for an average person to find out where their bank is” on the worst fossil fuel investments, RAN’s Starbuck said. “I would encourage anyone who’s a customer of these banks to let their bank know how they feel about it.”

The Sierra Club’s Carr said consumers should be asking their banks about risky coal investments: “Are you exposing my investments to these kinds of risks and investing in fossil fuel companies that drive the climate crisis or are you making responsible investments that will protect our communities from the climate crisis?”

A survey of the U.S. banks revealed that some have thought the issues through enough to have statements, policies, and reports ready to address the environment, specifically coal investments.

U.S. banks grade summary.

U.S. banks grade summary.

CREDIT: Shorting the Climate report

Mary Claire Delaney of Morgan Stanley directed ThinkProgress to the company’s environmental and coal policy statements. The environmental statement says the bank considers technology change, clean energy transfer, and global emissions trading markets the best strategies to reduce carbon emissions. The company vows to help all clients transition into a world where climate change is taken seriously in markets, regulations, and risk assessments. It does draw the line at mountaintop removal coal mining and says it has and will continue to reduce its “exposure” to coal mining. The bank’s coal statement goes on to say that the bank will “decline financing transactions that directly support the development of new or physical expansions of coal-fired power generation” in the developed world.

A Wells Fargo spokesperson told ThinkProgress the bank “understands its responsibility to address social, economic and environmental challenges throughout its business,” and pointed to its Environmental and Social Risk Management Statement and 2015 Corporate Responsibility Report. The spokesperson concluded: “We are proud of our efforts to engage a variety of stakeholders, invest in clean tech solutions and manage our own environmental footprint to accelerate the transition to a lower-carbon economy.”

PNC Bank said it does not comment on third-party studies but also pointed to its Corporate Sustainability Report. A spokesperson for JPMorgan Chase declined to comment. Calls and emails to Bank of America, Citigroup, and Goldman Sachs — the other U.S. banks in the report — were not returned.

Pension fund after pension fund, school after church have all begun to divest their assets from risky fossil fuel stocks — and the trend has had an impact in making development projects less attractive.

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