5 ways the biggest U.S. banks are managing climate change

May 11, 2022 1:52 PM

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Climate change continues to concern the banking industry as it watches developments in Washington, such as last month’s proposed SEC rule that would require publicly traded companies, including banks, to disclose a broad array of climate-change-related exposures.

Here are five ways the biggest banks are responding to climate change.

Commercial banking

Wells Fargo became the latest large bank to add a chief sustainability officer to its senior management with the appointment of Robyn Luhning. In the new role, Luhning will run the bank’s climate change initiatives and oversee its sustainability financing institute.

Despite establishing a goal in March 2021 to reduce greenhouse gas emissions to net-zero by 2050 and allocate $500 billion to sustainable financing between 2021 and 2030, Wells Fargo is one of several banks receiving the attention of climate activists this year.

With ongoing scrutiny of financing for the fossil-fuel industry, “sustainability and addressing climate change are business imperatives at Wells Fargo and require a dedicated, elevated focus,” said vice chairman of public affairs Bill Daley.

Read more:

Wells Fargo names first-ever chief sustainability officer

Commercial lending

TD Bank, the first major Canadian outfit to commit to net-zero emissions by 2050 when it cut ties to oil and gas projects in the arctic in 2020, has outlined plans to achieve its goal with new targets for reducing emissions intensity for lending in the energy and power generation sectors.

TD’s focus on emissions intensity, which considers the lender’s total financing to a company and its sector along with the borrower’s enterprise value and emissions, will enable the bank to expand lending to firms in those industries, helping them to finance their decarbonization efforts.

“Many of our big and important clients have been working on their own decarbonization plans for many years, and that requires capital,” said Janice Farrell Jones, senior vice president for sustainability and corporate citizenship. “They are growing their own businesses in less carbon-intensive spaces and looking for both capital and advice to do that.”

Read more:

TD aims to cut emissions intensity from loans in net-zero plan

Commercial banking

Citigroup and Bank of America have joined forces with European banking gaints Standard Chartered, BNP Paribas, Crédit Agricole CIB and Société Générale, and the Center for Climate-Aligned Finance at RMI, to address climate change in the aviation sector.

Two and a half percent of global carbon dioxide emissions are generated by the air-travel industry, a figure which is set to rise significantly by 2050 unless action is taken, according to the newly formed Aviation Climate-Aligned Finance Working Group.

The group aims to help banks assess how clients are faring each year in meeting climate targets. “The financial sector has set its own net-zero goals and is now in the position to support the aviation industry,” said Citi global co-head of aviation Munawar Noorani in an interview.

Read more:

Six big banks team up to aid aviation industry’s climate transition

Environmental, social and governance

A Wells Fargo human rights impact assessment commissioned to “gain better understanding” of how customers, employees and other stakeholders are affected by the way it conducts business failed to appease the Interfaith Center on Corporate Responsibility that pushed for the report.

While the bank posted a set of “priority recommendations” on its website in February, based on the evaluation made by law firm Foley Hoag, the 18-page published summary was considered “disappointing” by Sister Nora Nash, director of corporate social responsibility at the Sisters of St. Francis of Philadelphia, which is part of the ICCR.

Wells is taking action on the recommendations “as we evolve our human rights practices,” said spokesperson Kim Erlichson, but “we recognize there is more work to do and are committed to ongoing engagement with stakeholders.”

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Investors call Wells Fargo’s 18-page human rights report ‘disappointing’

Commercial banking

Shareholders will put significant pressure on nine major U.S. and Canadian banks in upcoming shareholder meetings to tighten lending policies to fossil-fuel companies involved in new oil and gas industry projects.

U.S. banks JPMorgan Chase, Bank of America, Wells Fargo, Citigroup, Goldman Sachs and Morgan Stanley, and their Canadian counterparts Bank of Montreal, TD Bank and RBC have urged shareholders to vote against the proposals, which are unlikely to pass.

However, activists are playing a long game; securing more than 5% of the vote ensures these measures can be taken up again next year. Paul Rissman, a member of the board of directors at the Sierra Club Foundation, expects this threshold to be met. “It doesn’t matter if they pass or not, what matters is if they get a good vote,” he said.

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Largest U.S. banks to face shareholder votes on climate change