Big banks haven’t given up on fossil fuels, with $ 4 trillion from Paris

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(Bloomberg) – As executives from JPMorgan Chase & Co., Citigroup Inc., Deutsche Bank AG and other lenders prepare for the largest UN climate summit in six years, their companies continue to contribute to provide almost as much money for fossil fuels as it does for green projects.

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Scientists have made it clear that time is running out to avert a climate catastrophe. Yet this year alone, banks organized $ 459 billion in bonds and loans for the oil, gas and coal sectors, according to data compiled by Bloomberg. At the same time, they’ve arranged $ 463 billion worth of green bonds and loans, with fees more or less evenly spread.

Since the Paris Agreement at the end of 2015, banks have played a leading role in the global warming that has caused increasingly deadly storms, fires and floods. During the period, the industry generated more than $ 17 billion in fees facilitating nearly $ 4 trillion in fossil fuel financing. The money has helped fuel carbon emissions which, at the current rate, average temperatures will rise well above the 1.5 degrees Celsius identified as essential to avoid irreversible damage.

Now, as world leaders prepare to descend to Glasgow, Scotland for the COP26 climate talks, a growing number of investors and activists are demanding that banks stop funding polluters – before they can it is not too late.

“It is extremely clear what banks need to do,” said Miguel Nogales, co-chief investment officer at Generation Investment Management LLP, the $ 36 billion fund manager co-founded by former US vice president Al Gore. “No funding for new coal plants, no funding for new oil fields.”

Next month’s talks in Glasgow have been dubbed the finance COP, meaning the focus will be on the extent to which the banking sector is doing everything possible to prevent carbon dioxide from spilling into the atmosphere. As the talks approach, banks and asset managers have issued a deluge of climate statements, assuring stakeholders that they are committed to eliminating net issuance from their loan and investment portfolios – or achieve net zero – by the middle of the century.

On the surface, the banks recognize the problem. Most of the world’s largest lenders, including JPMorgan, Citigroup, Deutsche Bank and Bank of America Corp., are part of the Glasgow Financial Alliance for Net Zero. But in reality, they haven’t yet shown that they can purge their CO2 loan books fast enough.

“At the top of many big banks, you realize that they will have to take a step back from funding some fossil fuel projects, but many are just beginning that journey,” said Jessica Ground, global head of the London based environment. , social and governance at Capital Group, which manages $ 2.6 trillion in assets.

Bill Winters, CEO of Standard Chartered Plc, said earlier this month that “it is just not practical” to expect banks to stop funding the partially fossil fuel industry. because it would undermine transition efforts, especially in emerging countries. And then last week Goldman Sachs Group Inc. CEO David Solomon said his company would not abruptly stop working with fossil fuel companies, stressing the need for a balanced transition to green energy. which avoids higher energy prices.

According to the Sunrise Project, an Australian-based environmental nonprofit, if banks are to be taken seriously about their net zero liabilities, they must stop funding companies and projects to expand coal-producing infrastructure, oil and gas or power generation. And all corporate finance and subscriptions by coal companies in rich countries are expected to be phased out by 2030 “at the latest,” the group said in an email. For non-OECD countries, the deadline should be 2040, he said.

Banks often respond to criticism of their fossil fuel financing by citing their commitment to finance clean energy, the Sunrise Project said. But the group called it a “distraction.” Investing in clean energy does not mitigate the effects of lending to the world’s worst polluters, he said.

JPMorgan, America’s largest bank, is the world’s largest provider of financing for the fossil fuel industry and also ranks as the number one underwriters of green bonds, according to data compiled by Bloomberg. The New York-based company has made around $ 985 million in revenue since the end of 2015 arranging debts and loans for the oil, gas and coal industries. This compares to the roughly $ 310 million it has generated in green finance revenue.

San Francisco-based Wells Fargo & Co. makes even more loans to the fossil fuel industry than JPMorgan, but does far less bond underwriting. Citigroup is the second largest provider of fossil finance, from which it has generated nearly $ 890 million in revenue over the past six years, according to Bloomberg data. Bank of America comes next with around $ 690 million.

To measure the involvement of each bank, Bloomberg data includes bonds and syndicated loans taken out for companies that produce or extract oil, natural gas and coal. These figures are assessed in relation to the debt that each bank has contracted on behalf of private and public issuers for eligible climate or environmental projects.

There are weaknesses in the dataset. For example, part of a loan to an oil company may have been used for a clean energy project. Bloomberg has started tracking fees banks charge for making loans in 2018, so the fees for 2016 and 2017 may be underrepresented. But none of this changes the big picture the data leaves – that banks have financed hundreds of billions of dollars in carbon emissions.

At the current rate of greenhouse gas emissions, the United Nations warns that the average global temperature is expected to be 2.7 degrees Celsius above pre-industrial levels by the end of this century. At this level of warming, entire populations will be displaced by rising sea levels, large numbers of species will be threatened with extinction, and deadly forest fires and floods will become much more frequent.

The International Energy Agency said this month that the world is woefully behind in achieving the necessary emission reductions. “Each data point showing the speed of energy change can be countered by another showing the stubbornness of the status quo,” the agency said in its latest report.

At JPMorgan, leaders say they are aware of the urgency of the moment. “Climate change is a critical issue of our time, and we are committed to doing our part to address it,” Marisa Buchanan, the company’s global sustainability manager, said earlier this month as part of a public commitment to carbon neutrality by half-time. century.

JPMorgan said in May that it planned to report a 35% reduction in “operational carbon intensity” for its oil and gas portfolio by the end of the decade. The commitment follows the company’s announcement last year that it is aligning its fundraising activities with the Paris Agreement.

Nogales called JPMorgan’s decision to join the Net-Zero Banking Alliance a “positive step”. But he also called it “a high standard of action which the IEA says means turning off the financial tap to new fossil fuel projects as early as this year.” The extent to which signatories do so will be the “real test” and one that investors “will follow very closely,” Nogales said.

An important element of the 2015 Paris climate agreement was to involve the financial sector, reflecting the need to divert money from polluting activities. The latest wave of net zero commitments from banks and asset managers follows this deal. But details of how they plan to achieve carbon neutrality in 30 years are still scarce.

Nogales said part of the problem is that most net zero targets are too far into the future. “The problem with very long-term goals is that it’s usually going to be a different group of executives who will be running these companies at this point,” he said, adding that Generation Management wanted CO2 targets are set for 2030, in line with UN targets. recommendations to halve emissions over the next decade.

The latest assessment by the UN Intergovernmental Panel on Climate Change “was extremely clear,” Nogales said. “We are facing a massive emergency. “

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