FOR IMMEDIATE RELEASE
May 14, 2020
Washington, D.C. — Today, Business Forward Foundation issued a report on the positive impact of “sustainable banking.” We Can’t Manage if Banks Won’t Measure argues that banks must do more to disclose their climate change risk and their lending to fossil fuel companies.
In the four years since the Paris Climate Agreement, global banks directed $2.7 trillion into financing fossil fuel companies. Financing grew from $640 billion in 2016 to $736 in 2019. Lending to exploration companies working to bring new gas, oil, and coal fields online increased by 40% in 2019 alone.
“Seven out of 10 Americans would prefer to use a ‘sustainable’ bank, but we don’t require banks to disclose to clients and investors how much they’re lending to coal, oil, and gas companies,” explained Jim Doyle, President of Business Forward Foundation. “Universal, comprehensive, and comparable bank disclosure would reward truly ‘sustainable’ banks — and help fix our broken energy markets.”
“We know these loans are trouble, because these same banks are advising their high net worth clients to avoid fossil fuel companies,” said Doyle. “Banks earn their fees off the loan, then pass the risk to outside investors in the form of collateralized loan obligations. Coal companies get loans on better terms than they should; investors buy more risk than they expect; and fossil fuel emissions keep mounting.”
Reliable disclosure could have a big impact on renewable energy, because commercial banking assets in the U.S. are $14 trillion. If just 1% of commercial U.S. bank deposits were redirected toward U.S. renewable energy projects, America’s renewable energy investment would nearly triple (255%). Alternatively, if banks shifted just half of their fossil fuel loans to renewable energy providers in the U.S., renewable energy investment here would grow by 233%.
“If regulators required meaningful disclosure, bank lending would change,” explained Doyle. “When Goldman Sachs announced it would stop investing in arctic drilling projects last December, JP Morgan Chase, Wells Fargo, Citi, and Morgan Stanley followed with similar announcements of their own.”
1. We already have more coal, oil, and gas than we can safely burn, but banks are rushing loans to fossil fuel companies anyway.
2. One-third of these loans will help bring new coal, oil, and gas fields online – and these last fields will do more damage than the ones we have now.
3. We know these loans are trouble because banks keep advising their high net investors to avoid fossil fuel companies.
4. Once banks earn their fees, they often securitize the loan and sell it to investors…most likely you.
5. Public shaming and peer pressure works: When Goldman Sachs restricted lending for Arctic Circle drilling, Chase and Wells Fargo followed.
6. Commercial banks are so big, even a marginal change in their lending would make a huge difference in renewable energy, and this new investment would accelerate the ongoing shift from fossil fuels to renewable energy.
7. To manage this problem, we need to be able to measure it. Each bank must disclose its financed emissions so that customers can pick which bank to use.
8. With universal and comparable data, bank customers and investors can fix our broken energy markets.
ABOUT BUSINESS FORWARD FOUNDATION
The Business Forward Foundation is an independent research and education organization that takes a business-minded look at policy issues affecting America’s economic competitiveness. Our work combines insights and advice from business leaders across the country with rigorous policy analysis. Through white papers, issue briefs, conference calls, and other events, we educate policy makers and the public about climate change, immigration reform, infrastructure investment, the future of work, and other critical issues.