The six biggest banks on Wall Street are failing to live up to key pillars of their environment, social and governance (ESG) to stakeholders, according to analysis by Ceres and the Transition Pathways Initiative.
It has found that JPMorgan Chase, Bank of America., Citigroup, Goldman Sachs, Morgan Stanley and Wells Fargo have yet to align their oil and gas financing goals for 2030 with a scenario that keeps global warming within the critical threshold of 1.5C.
There are two counter prevailing trends in the US. On the one hand, banks’ continued support for fossil fuels, which is the primary source of planet-warming pollution, has left the industry and its senior executives exposed to criticism from shareholders and activist groups.
However, the financial services sector is under intense pressure from the American right as the Republican Party penalises lenders for appearing to embrace ESG goals, such as reducing financed emissions.
“Our analysis highlights just how difficult it is for banks and their stakeholders to assess and compare how much progress they’re making on real oil and gas emissions reductions,” said Blair Bateson, director of the Ceres Company Network at Ceres. “And it goes beyond these six banks.”
BloombergNEF estimates that the ratio of clean-energy lending and equity underwriting relative to fossil fuels needs to hit 4 to 1 by the end of the decade to live up to the Paris climate agreement. However, its research showed that by the end of 2021, that ratio for the finance industry was roughly 0.8 to 1.
The banks highlighted in the Ceres and TPI report are all members of the Net Zero Banking Alliance, a coalition that requires signatories to set interim targets for the most carbon-intense sectors on their balance sheets. All six have set 2030 goals for the oil and gas sectors.
The report said the methodologies underpinning the 2030 targets of the six Wall Street banks “lack sufficient comparability and transparent disclosure” and leave “an array of material business activities outside the scope of their targets, which in turn creates loopholes for banks to continue financing high-carbon activities.”
Citigroup said in a statement that its 2030 emissions reduction targets are benchmarked against the International Energy Agency’s Net Zero Emissions by 2050 scenario, which is 1.5C aligned. The bank said it’s committed to supporting the transition to a low-carbon economy.
JPMorgan, Bank of America, Goldman and Morgan Stanley declined to comment when the report was published while Wells Fargo spokespeople said there wasn’t anoynet immediately available.
In the Ceres-TPI report, Bank of America was considered to demonstrate “best practice” in two areas: targeting absolute emissions instead of the intensity of emissions, and setting 2030 targets that align with warming of less than 2C.
Citigroup also has an absolute emissions target, while Wells Fargo was considered to exhibit best practice for excluding carbon offsets.
JPMorgan, Goldman Sachs and Morgan Stanley didn’t demonstrate best practice in any of the areas reviewed by Ceres and TPI.
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