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To Be a Climate Leader, the U.S. Must Stop the Wall Street Money Pipeline | Opinion

Newsweek logo Newsweek 4/14/2021 Ginger Cassady
a group of people wearing costumes: Actor Joaquin Phoenix (C) stands with protesters on the steps of the U.S. Capitol during the "Fire Drill Fridays" climate change protest and rally on Capitol Hill on January 10, 2020, in Washington, D.C. © Paul Morigi/Getty Images Actor Joaquin Phoenix (C) stands with protesters on the steps of the U.S. Capitol during the "Fire Drill Fridays" climate change protest and rally on Capitol Hill on January 10, 2020, in Washington, D.C.

It's widely anticipated that President Joe Biden will use his Earth Day Summit on April 22 to announce his administration's climate commitment at November's Glasgow climate summit.

Biden is promising a "whole-of-government" approach to confronting the climate crisis that involves agencies and policy areas that have not traditionally been oriented with climate considerations as a top priority. This is a very encouraging start and certainly a sea change in rhetoric from the recent past.

But for the United States to be taken seriously as a climate leader on the world stage, there is a glaring brass bull in the room that cannot be ignored: Wall Street.

The U.S. banking giants play a hugely disproportionate role in driving global climate emissions. If the U.S. is going to take on the mantle of climate leader and try to persuade others to follow its supposed lead, its regulatory apparatus is going to need to take on the task of reining in its huge global fossil finance footprint.

The top four bankers of fossil fuels—and thus of climate chaos worldwide—JPMorgan Chase, Citibank, Wells Fargo and Bank of America—are all familiar Wall Street faces.

A recently published analysis, co-authored by my organization and five others, concerning finance for the fossil fuel industry showed that American banks are responsible for more than a third of all fossil financing provided by the world's 60 largest banks since the Paris climate agreement was adopted in late 2015. JPMorgan Chase alone showered well over $300 billion on the fossil fuel industry during that time. Though Chase recently committed to align its financing with the Paris agreement, it continues essentially unrestrained financing of fossil fuels.

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Internationally, the economic downturn caused by the coronavirus pandemic resulted in a roughly 9 percent dip in fossil fuel funding in 2020, after many years of steadily increasing numbers—although 2020 levels remain higher than 2016 or 2017. This drop provides Wall Street banks with a clear choice point; they can lock in this downward trajectory of support for the primary industry driving the climate crisis, or they can reflexively snap back to business as usual as the economy recovers, wasting an opportunity by turning a potential historic inflection point into just a COVID blip.

Over the past year, the financial press has been abuzz with wave after wave of climate policy announcements from major banks suddenly making long-term commitments, with the most common goal to achieve net zero emissions by 2050.

Make no mistake, these commitments represent a direct, if reluctant, admission by these financial institutions that they are carbon majors just like the big oil companies, and that they must zero out carbon pollution by midcentury, like all major emitters.

But while the mere fact of this newfound climate consciousness by Wall Street banks may be symbolically profound, the substance of the actual policy details remains grossly inadequate to the task. There is a clear danger that far off climate commitments that require complicated multi-year processes to measure and disclose financed emissions across all sectors of the economy will just become smokescreens behind which the banks will hide their unwillingness to take immediate action to tightening the spigot on the capital they are pouring into fossil fuel companies.

While it was overlooked amid the hype around banks' net zero pledge, Citibank last month took a modest but important step, committing to phase out its coal power financing on serious timelines and not taking on new clients that are building new coal-fired power plants. That's the kind of policy we need, but for all fossil fuels—and if banks don't establish those policies on their own, the Biden administration should require them to do so.

As it becomes fashionable for the world's biggest banks to claim their business practices are "Paris aligned," it becomes critical to measure their real world actions against those required to actually achieve the goals of the Paris agreement.

Last September, a simple yardstick called the "Principles for Paris-Aligned Financial Institutions" was endorsed by 60 climate and rights organizations from around the world to do just that. These principles emphasize that this must include an end to financing new fossil fuel infrastructure and an interim target of at least halving financed emissions by 2030, as made clear by the scientists in the U.N.'s Intergovernmental Panel on Climate Change (IPCC).

Following the years-long, people-powered uproar at Standing Rock in protest over the Dakota Access Pipeline, many large banks expressed regrets, with a top Citibank executive publicly wishing his bank had an opportunity for a "do-over." Yet these same banks are currently throwing their full weight behind the highly contentious Line 3 tar sands pipeline being rushed through construction amidst vehement Indigenous-led resistance in northern Minnesota. Mega infrastructure expansion projects like Line 3 are an investment in decades more dependence on one of the dirtiest forms of fossil fuels at exactly the time when we need to be heading in the other direction as a society.

According to the IPCC, we now have fewer than 10 years to cut global climate pollution in half to avoid the catastrophic consequences of exceeding 1.5 degrees Celsius of warming. That means fewer than 10 years to transform almost every aspect of our industrial economies. The global community never before set out to achieve such a transformation. It most certainly will not be possible if the world's banks do not put their financial muscle to the wheel and push with, rather than against, all those who aspire to a stable climate and a more just, sustainable world.

Ginger Cassady is executive director of Rainforest Action Network.

The views expressed in this article are the writer's own.

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