Your Banking Habits Could Be Fueling Climate Change

Big Oil has leaked enough gas into our ever-rising oceans that they promptly ignite upon being struck by lightning. Despite the growing interest in electric vehicles and renewable energy, consumers continue to unknowingly pump trillions into the fossil fuel industry through one of its most generous—and perhaps least-suspecting—investors: banks.

In March, Rainforest Action Network released its annual Banking on Climate Change report, which revealed that in the five years since the Paris Agreement was signed, the 60 biggest banks in the world (13 of which are in the U.S. and Canadian) have given fossil fuels an alarming $3.8 trillion. JPMorgan Chase—the multinational giant behind Chase Bank, J.P. Morgan & Co., Bank One, and Washington Mutual—has long been fossil fuels' leading financier, donating a total of $317 billion since 2016. The 200-year-old financial institution (the U.S.'s largest, by assets) operates more than 5,300 branches of the U.S.-based Chase franchise alone.

Following a series of damning reports, JPMorgan Chase pledged to reduce the end-use carbon intensity of its oil and gas investments by 2030—but only by 15%. Other notable fossil fuel financiers included in the report were Citi ($237 billion since 2016), Wells Fargo ($223 billion), Bank of America ($198 billion), Royal Bank of Canada ($160 billion), MUFG Bank of Japan ($148 billion), and U.K.-based Barclays ($145 billion). 

Although countless other banks have set reduction targets à la JPMorgan Chase, 21 of the 60 institutions ranked by RAN increased their fossil fuel investments between 2019 and 2020, the biggest being France-based BNP Paribas, the Industrial and Commercial Bank of China, and the Japanese multinational SMBC Group.

Clean Energy Increasingly Desperate for Funding

While the world's biggest banks pour money into the sector most responsible for climate change, funding for renewable energy is becoming increasingly imperative and simultaneously overlooked. In 2018, the Intergovernmental Panel on Climate Change said in its Summary for Policymakers that $2.4 trillion—or 2.5% of the world's GDP—would have to be invested into clean energy between 2016 and 2035 to limit global warming to the internationally agreed upon maximum target of 2.7 degrees Fahrenheit (1.5 degrees Celsius).

And yet, the data proves fossil fuel subsidies continue to increase while those for renewable energy lag. The most recent International Monetary Fund report that included data on fossil fuel subsidies showed they've been climbing since 2010. An estimated 6.5% of the world's GDP was spent on fossil fuels in 2017, half a trillion more than what was spent on them two years prior, the report said. 

According to the Environmental and Energy Study Institute, the U.S. allocates about $20 billion per year to fossil fuel subsidies, even though globally, the damage caused by fossil fuels is estimated to have cost $5.3 trillion in 2015 alone. A 2020 report from the International Renewable Energy Agency estimated that the U.S. accounted for 14%—$23 billion—of global renewable energy subsidies in 2017.

Advancements in Sustainable Finance

The United Nations Environment Programme's Finance Initiative (UNEP FI) works with institutions around the world to develop sustainable banking practices. Only six UNEPFI signatories are based in the U.S.: CITI (ranking second on RAN's fossil fuel financier list), Goldman Sachs (ranking 15th), Beneficial State Bank (which endorsed the RAN report, in which it was not ranked), BBVA (ranking 42nd), and Amalgamated Bank and Zenus Bank, neither of which were mentioned in the RAN report.

 Altogether, 235 institutions from 69 countries have signed onto the UNEP FI, providing a total of $60 trillion in assets. All signatories are required to publish a report and self-assessment within 18 months, then annually, and act on their self-identified targets toward responsible banking within four years. Phasing out inefficient fossil fuel subsidies is included as a goal in the UN's 2030 agenda, with which UNEP FI signatories must comply.

Choosing a Responsible Bank

The best way to ensure you're banking sustainably is to look for certifications. There are 43 B Corp-certified financial institutions in the world, including 15 in the U.S. Amalgamated is the largest B Corp bank in the country and one of the few that are also publicly traded. The unionized bank, majority-owned by Workers United, is carbon-neutral, powered by 100% renewable energy, and certified by the Global Alliance for Banking on Values, an independent network that prioritizes transparency and social and environmental sustainability.

The U.S. Department of Treasury also grants a CDFI certification—Community Development Financial Institutions—to U.S. banks and credit institutions that contribute to underserved economic communities, therefore driving revitalization.