Citi, Bank of America join global push to curb emissions

Three of the largest U.S. banks have joined a new global alliance focused on mobilizing the private sector to align financing activities with the goals of the Paris climate accord.

Citigroup, Bank of America and Morgan Stanley were among 43 banks to form the Net-Zero Banking Alliance, announced Wednesday ahead of President Biden’s head of state climate summit. The $6 billion-asset Amalgamated Bank in New York is also a member of the alliance, which will work with similar, industry-led groups for insurers and asset managers.

Together, those industry groups will form the Glasgow Financial Alliance for Net Zero, which aims to encourage private-sector financial institutions to collaborate on speeding the transition to a low-carbon economy. Members of the banking alliance in particular will be required to set intermediate targets for shrinking the carbon impact of their lending activities and adopt sector-specific guidance initially aimed at the most carbon-intensive industries in their portfolios.

Biden administration officials have said that California wildfires and other natural disasters triggered by climate change pose significant risks to the financial system.


“Sustainability cannot be a fad. It has to be how we fundamentally do our business, and that is no more true than it is today,” Thomas Nides, managing director and vice chairman at Morgan Stanley, said at a panel discussion Wednesday. “This is a time for financial institutions not to compete but to work together.”

The banking industry’s role in contributing to climate change has come under fire in recent years. The very largest U.S. banks have faced increasing criticism by investors and environmental groups for continuing to finance fossil fuel-heavy industries even after the signing of the 2015 Paris climate accord.

The six largest U.S. banks, which include Citi, BofA and Morgan Stanley, have announced plans in recent months to achieve net-zero emissions from their financing activities by 2050, but three of them, JPMorgan Chase, Wells Fargo and Goldman Sachs, were not among the first members of the Net-Zero Banking Alliance.

Jamie Dimon, JPMorgan Chase’s chairman and CEO, said in a recent letter to shareholders that while climate change is a threat, “the solution is not as simple as walking away from fossil fuels.”

“We will need resources such as oil and natural gas until commercial, affordable and low-carbon alternatives can be developed to meet all of our global energy needs.”

Policymakers have also focused on the risk that climate change poses to the financial system. PG&E’s bankruptcy filing in 2019 following ruinous wildfires in California is considered one high-profile example of the kinds of risks lenders could face in a warming world.

Republican lawmakers have criticized Biden’s climate efforts as politicizing the banking system. Senate and House Republicans sent letters this week to former Secretary of State John Kerry, also the Biden administration’s climate envoy, voicing their objections. Banks’ decisions to cut off financing for certain activities, like oil drilling in the Arctic, have jeopardized the livelihoods of workers, they said.

Further, they argued that only Congress can decide whether certain industries should be off limits to banks.

The Biden administration is expected to announce a goal later this week to halve U.S. greenhouse gas emissions by 2030, an ambitious aim unlikely to be met without tremendous coordination between the private and public sectors.

“There’s no budget of any country that can do what we need to do,” Kerry said Wednesday. “I want to underscore the power that is created with 43 banks from 23 countries joining together to say we’re going to be part of this effort to move the economy of the world toward the new energy future.”

Speakers at Wednesday’s event emphasized that the transition to a low-carbon economy also presents tremendous opportunities for the banking industry. Not only can banks finance new technologies to produce clean energy, but they can also work with existing clients to shrink their own carbon footprints. Among other things, members of the Net-Zero Banking Alliance are asked to establish short-term targets to reduce emissions from the most carbon-intensive industries, including oil and gas, coal, aluminum, agriculture and transportation.

Bankers, for their part, emphasized that they need support from the government and public sector in order to meet those goals. The transition to a low-carbon economy also means shifting billions of people’s spending behaviors, and banks cannot achieve that without supportive policies by the government, they said.

“It’s about cars, mortgages, homes, and that is a huge task,” said Ana Botin, executive chairman of Spain’s Banco Santander. “We’re not going to be able to do this alone, even if all the banks on the planet get together, which by the way, we need to do that.”

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