Last September, climate leader and 350.org founder Bill McKibben authored an article in the New Yorker that summarized the consequential role that major banks play in either supporting or undermining the fight against climate change:
“On the spectrum of shifts that the climate crisis will require, bankers and investors and insurers have it easy. A manageably small part of their business needs to disappear, to be replaced by what comes next. No one should actually be a master of the universe. But, for the moment, the financial giants are the masters of our planet. Perhaps we can make them put that power to use. Fast.”
The challenge that McKibben outlined—making banks use their power to constructively fight rather than continue to fund climate change—served as the inspiration and backdrop for last week’s launch of BankFWD at Confluence’s Climate Solutions Summit. BankFWD is an initiative founded by members of the Rockefeller family to influence financial institutions to phase out financing for fossil fuels and lead the transition to a just, zero-carbon economy.
The clock is ticking. The world has ten years to cut global emissions in half to avoid the irreversible impacts of climate change and make a timely and just transition to a zero-carbon future. Doing so requires an immediate end to fossil fuel expansion, eliminating all new coal, oil and gas projects, and the eventual phase-out of existing fossil fuels across the globe. The most efficient tool for triggering such wide-scale change would be public policies that regulate and incentivize emissions reductions. Yet the absence, to date, of sufficient government action to reorient our world away from its reliance on fossil fuels means that all other tools with the power to shape the global emissions trajectory —like bank policies—must take center stage in strategies to steer the world towards a safer climate.
In her remarks at the Climate Solutions Summit, Valerie Rockefeller, speaking with and on behalf of her fellow family members and BankFWD co-chairs, Danny Growald and Peter Gill Case, argued that “by providing ample financing flows to fossil fuel companies via loans and underwriting, banks enable cash-strapped companies to continue acting in their own short-term interests rather than for the benefit of us all.”
The potential is enormous. If banks were to cut back or cut off their fossil fuel finance, it would be one of the swiftest ways to change the world’s climate trajectory. It would reduce present and future fossil fuel activity by
(1) increasing the cost of capital and making carbon-intensive projects too expensive to develop;
(2) eliminating the decades-long course of future emissions that new projects lock in;
(3) increasing the financing available for clean energy alternatives; and
(4) providing political cover for policymakers to pass much-needed climate legislation.
Yet, instead of phasing out their financing of fossil fuel companies, 35 of the world’s largest banks are increasing it, growing their fossil fuel funding to $2.7 trillion since the world’s leaders signed on to the historic Paris Agreement committing their countries to reducing their emissions and, by extension, their reliance on fossil fuels.[1] The world’s largest provider of fossil fuel finance is JPMorgan Chase, followed by Wells Fargo, Citibank, and Bank of America.
In addition to the scientific case that financial institutions should heed for phasing out their fossil fuel financing to mitigate climate change, there’s a strong business case to be made for doing so, as well. From an asset management perspective, fossil fuel companies make poor investments. They have been the worst performers of the S&P 500 for the last decade, and their regulatory and stranded asset risks are only increasing.
From a business development perspective, banks face intense competition for a new generation of clients set to inherit up to $68 trillion within the next 25 years. From this generation, for whom climate change consistently ranks as a top issue, an estimated 80% predict they will change their financial advisor.[2] The opportunity is enormous.
Significant momentum for climate-smart policy change is building within banking institutions and across the financial industry. Just last month, for example, a proposal to align JPMorgan Chase’s financing with the Paris Goals received 49.6% of shareholder votes. Many other major financial institutions, including BlackRock, Barclays, Royal Bank of Scotland, Goldman Sachs, and Citibank, in addition to JPMorgan Chase, have all revised their climate policies in recent months, taking steps that are necessary to achieve global climate goals, but remain far from sufficient.
Given the high stakes of inaction on climate change—irreversible and systemic impacts to human, economic, and ecological well-being—the BankFWD initiative is launching as a platform to harness and demonstrate the powerful demand that exists for banks to lead the transition to a just, zero-carbon economy. “Our task,” Valerie challenged the audience at the conclusion of her remarks, “is to exercise our consumer power to demonstrate high demand for banks to lead, rather than impede, climate progress and an equitable transition to a clean energy economy that promotes climate, economic, and social justice.”
For more information about the BankFWD initiative or to learn how to engage with your bank about climate change, email info@bank-fwd.org or visit our website at www.bank-fwd.org.
