A New Year and New Momentum for Decarbonizing Bank Lending

Editor's note: The following post was written by ­Edie Farwell, Senior Program Director for Climate Solutions at Confluence Philanthropy.

A week before the inauguration of the Biden-Harris administration, the Robert & Patricia Switzer Foundation invited the Climate Solutions Collaborative (C2C) of Confluence Philanthropy and the Rainforest Action Network to present a webinar on decarbonizing bank lending to the Switzer and Confluence members.

With the United States now officially recommitted to the Paris Climate Agreement, our nation – under the leadership of the most climate-forward president ever – is finally ready to tackle the dangers of a changing climate. Across the network, Confluence Philanthropy members have expressed a similar dedication to limiting global warming increases to the United Nations’ stated 1.5°C (2.7°F) goal, the threshold beyond which scientists believe the climate crisis could turn catastrophic.  

The decarbonization-themed webinar first focused on disentangling the complex, systemic relationships tying U.S. banking institutions together with the fossil fuel industry, which have resulted in the banking industry’s tremendous financial backing of carbon intensive operations. We then explored the role of America’s broader financial and philanthropic communities in minimizing greenhouse gas emissions, accelerating climate investing and charting a pathway forward to a net-zero economy.

Despite their best efforts to craft well-intentioned, climate-centered investment strategies, countless values-aligned asset managers still bank at large-scale financial institutions like JP Morgan Chase, Bank of America, Citi and Wells Fargo, which have a known track record for bankrolling and underwriting fossil fuel infrastructure projects. In fact, these U.S.-based financial conglomerates were responsible for more than half (USD $1.9 trillion) of all investments funneled towards the fossil fuel industry over the past five years. Despite expressing their support for the Paris Climate Accord, JPMorgan Chase and Citibank, for example, effectively led the underwriting of a USD $1.25 billion bond issuance for TC Energy and the controversial Keystone XL oil pipeline last year – a project President Biden halted on his first day in office.

Confluence launched their Decarbonizing Bank Lending Initiative to map out the network’s banking activities and partnerships, surveying their level of relational influence with bank managers servicing known fossil lenders. Confluence has more on this topic forthcoming in March.

After sifting through several key metrics (including previous climate-related corporate engagement and potential interest in joining with other members to advocate as small private client groups), C2C has developed a comprehensive toolkit designed to support clients in engaging with and pushing their banks to move towards a low-carbon future.

From letter writing, proxy voting and shareholder resolutions to potential fund transfers, allied philanthropies and asset management firms can adapt bank-specific resources that investors can utilize to engage with their bank on this issue, increasing the pressure to take much-needed climate action.

Beyond its goal of limiting global temperature rises to 1.5°C, the Paris Climate Agreement encourages financial institutions within signatory nations to ensure “finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development.” It is time for banks to match their actions with the commitments they publish, and to be leaders, not laggards, in addressing climate change. Momentum is clearly building from all sides. Companies like JP Morgan Chase, Bank of America, Citi and Wells Fargo must now ­– more than ever – divert their attention towards sustainable-finance offerings and begin incorporating climate factors into capital allocation and loan approvals, as well as portfolio monitoring and reporting. With a strong network of peer organizations let’s collectively serve as a catalyst to propel the banking system towards true decarbonization.