Opinion: Banks must stop financing oil expansion. If they don’t, their net zero commitments are greenwashing.

UN Secretary General Antonio Guterres recently called on banks and other financial firms to stop funding fossil fuel expansion.

“For too long,” he said, “the financial services industry has enabled the world’s reliance on fossil fuels. … The scientific and moral imperative is clear: there must be no new investment in fossil fuel expansion, including production, infrastructure and exploration.

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Guterres adds to a growing chorus of voices — including the World Council of Churches, the Muslim Council of Elders and the New York Board of Rabbis — which he spoke in support of the statement. It also largely aligns with the Science-Based Targets Initiative aiming to unify the reporting of greenhouse gas (GHG) emissions and other impacts, and Oxford Sustainable Finance Program.

They join the UN’s Intergovernmental Panel on Climate Change (April), the International Energy Agency (2021), and a range of Indigenous and environmental advocates (during the last years) by calling for an end to the expansion of fossil fuels.

The direction of travel is unmistakable: to bend the curve towards a zero-carbon future, stopping the construction of new fossil fuels must be the next step.

There is one hard, undeniable fact driving this consensus: the potential emissions from the fossil fuels already in production – the wells already drilled, the mines already dug – are taking the world well beyond 2°C of average warming. dangerous. targeted at the Paris climate summit and the backbone of most policies.

Even if coal fell to zero tomorrow — which is far from the case — oil in production BRN00,
+1.14%
and NG00 gas,
+0.64%
alone depletes more than the preferred carbon budget of 1.5°C.

Banks must stop financing the expansion of fossil fuels. If they don’t, their net zero commitments are greenwashing. These commitments largely target the direct pollution that banking operations, in branches, for example, create. And some banking sector commitments have pulled funding from coal expansion and targeted renewable energy projects.

(Editor’s note: JPMorgan Chase signed a commitment late last year to align its loans and net-zero emissions investment portfolios by 2050, joining more than 40 rival financial firms in the Net-Zero Banking Alliance. JPM is committed to “funding and facilitating” over $2.5 trillion over 10 years until the end of 2030 to advance long-term solutions that tackle climate change and contribute to sustainable development.)

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It is in the interests of all businesses and the global economy to halt the expansion of fossil fuels and curb rampant climate change. Increasingly frequent and severe heat waves, droughts, fires, storms and floods are destroying value in sectors ranging from real estate to agriculture CBD,
+0.95%.
Careless development of fossil fuels as business as usual risks an unpredictable and disorderly devaluation of these carbon-intensive assets, threatening to cause a macroeconomic shock. In fact, the US Treasury Department and other major financial watchdogs released a report warning of the disastrous consequences of climate chaos on the financial sector.

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A remarkably small group of nefarious corporations are driving the fossil fuel boom and threatening the stability of the economy.

Only 20 oil and gas companies, including Saudi Aramco, Russia’s Gazprom RU:GAZP
and ExxonMobil XOM,
+1.45%,
are responsible for more than half of upstream expansion plans – bringing new reserves online and exploring for new reserves. And just seven global banks are responsible for more than half of the lending and underwriting to those 20 companies in the six years since the adoption of the Paris Agreement.

The main lender is JPMorgan Chase JPM,
-1.39%,
which financed these 20 companies to the tune of $65 billion over the period 2016-2021. This includes, last year alone, $1.7 billion for Qatar Energy, $1.2 billion for Saudi Aramco, $1.1 billion for Exxon and $665 million for Petrobras PBR,
+3.13%.
JPMorgan Chase was the only US bank to lead deals with Gazprom, providing $1.1 billion backing in four separate bond deals during 2021.

They are the top five companies in terms of bringing new oil and gas reserves online, and account for more than a third of planned expanded upstream supply. Support for JPMorgan Chase, which the bank is targeting for its oil and gas portfolio, saying it has engaged in diversified investments, mocks its climate rhetoric.

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In recent weeks, CEO Jamie Dimon has doubled down on his support for fossil fuel expansion. In March, he reportedly pushed President Biden to expand US fracked gas production and build new liquefied natural gas infrastructure – despite years of commissioning new LNG terminals, rendering them useless to meet global demand. immediate energy demand.

At the bank last general meetingResponding to a general question about fossil fuel financing, Dimon cast doubt on the bank’s ability to achieve even its current weak climate goals: control.”

Two weeks ago, a crucial constituency – the bank’s shareholders – helped put JPMorgan Chase on the right track. Investors Mercy and Harrington submitted a resolution calling on the bank ensure that its funding does not contribute to the expansion of fossil fuel supply.

For any investor with a large portfolio, climate change is a clear and present threat to all of their holdings, and ending fossil fuel expansion is an urgent imperative. The JPMorgan resolution garnered strong minority support, including from the New York State Pension Fund, which manages hundreds of billions of dollars. Similar resolutions found traction in Citi C,
-2.10%
(second largest fossil fuel banker in the world), Wells Fargo WFC,
-1.13%
(#3), Bank of America BAC,
-1.39%
(#4) and Goldman Sachs GS,
-1.72%
(#4).

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More and more shareholders are living up to their fiduciary duty by asking banks to make a just energy transition a reality by investing in renewable sources rather than fossil fuel expansion. Our wallets depend on it.

Jason Disterhoft is climate and energy campaign manager for the Rainforest Action Network, at RAN.org

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