Banks Warming to Climate Action

The competition among banks this year to announce ever larger investments to fight climate change brings to my mind the famous reply given by legendary criminal Willie Sutton when asked why he robbed banks: “That’s where the money is.” That’s one of the prime reasons Trillium Asset Management Corporate teamed up with Friends of the Earth’s Green Finance Program and a handful of other institutional investors to press banks to account for environmental and social issues in their financing decisions. Given their resources, the financing decisions these banks make every day have a major role in our planet’s future.
There are some reasons for optimism. The following are just a few examples of the progress we’ve made with the banks over the past five years.
In March, Bank of America announced a $20 billion program to address climate change over the next ten years, ranging from financial incentives for its employees to purchase hybrid cars to $18 billion in new investments in renewable energy, green technologies and carbon emissions trading.
Not wanting to be outdone, Citigroup announced plans in May to target a total of $50 billion in climate-related investments over the next decade, including spending to reduce its own energy use and carbon footprint, and investments in renewable energy and green technologies. The commitment covers a wide range of Citigroup’s business, such as private equity investments in wind power companies, commercial development of green buildings, and loans targeted to help school districts and individual homeowners make energy efficiency improvements or install solar cells.
While J.P. Morgan Chase hasn’t announced a target for its climate related investments, it did just create a new special alternative energy investment unit and just committed $1 billion to a project developed by the Clinton Global Initiative to help 15 cities around the world make their buildings more energy efficient. J.P. Morgan also took the interesting step of making all its research reports on the investment impacts of climate change available to the public at www.jpmorgan.com.
The list goes on, with new environmental and climate commitments from Goldman Sachs, some regional U.S. banks like Wachovia, and of course, much leadership coming from large European banks as well.
Naturally, much of this progress comes from simple economic self-interest. As energy costs soar and more regulations of greenhouse gas emissions loom even here in the U.S., banks would be foolish to overlook burgeoning investment opportunities in renewable energy. But much of this progress comes as a result of years of advocacy from Trillium, other socially responsible investors, and environmental groups. Investors have demanded that investment banks’ research covers the business risks and opportunities of climate change. Earlier this spring, we and other investors withdrew a pending climate change resolution at Wells Fargo, after the bank’s president and other senior executives agreed to study how the bank should address climate change for key sectors of their business customers.
Despite all this progress though, the banks remain a twist on the old saying, “If you are not part of the solution, you are part of the problem.” They are both part of the solution and part of the problem. At the same time many of these banks have made commitments to boost their funding for green technologies, they continue to fund plenty of old highly polluting technologies like new coal-fired power plants which have huge climate change impacts. In the year ahead, we’ll be pushing banks to address this discrepancy and stop fighting climate change with one investment while they fund it with another.