Apr 16, 2021 - Energy & Environment

Climate spotlight moves to Wall Street and its overseers

Illustration: Lazaro Gamio/Axios

Illustration: Lazaro Gamio/Axios

Wall Street titans and the regulators overseeing them are increasingly important actors in the fight against global warming, and this week underscored that trend.

Driving the news: Two banking giants — JPMorgan Chase and Citigroup — yesterday vowed to steer trillions of dollars into sustainability efforts that include a focus on clean energy and climate.

  • JPMorgan, the largest U.S. bank, said that over 10 years it would "finance and facilitate" more than $2.5 trillion for areas like renewables, sustainable agriculture, development finance and more.
  • Citi, meanwhile, said it would provide $1 trillion in "sustainable finance" by 2030, a tally that folds in but expands existing commitments under that broad umbrella.
  • Citi said half the financing will be for various "climate solutions," while the other half is for areas like health care, affordable housing, racial equity and more.
  • Of note: The full scope of the efforts is hazy. Both banks said the "facilitate" side of the ledger means areas like advisory services, risk management, helping companies go public and more.
  • Bloomberg has more.

The big picture: The commitments, which arrive ahead of the White House climate summit next week, show how the banking sector is expanding its climate focus as pressure rises and clean energy markets grow.

But, but, but: Finance giants remain under pressure from climate activists.

  • They say banks should not only expand clean energy finance, but pull back from fossil fuels beyond existing policies that prevent financing for certain types of projects like coal plants and Arctic oil.
  • "The single most important thing JPMorgan Chase can do to address climate change and advance sustainable development is to phase out its fossil and deforestation financing, starting immediately," the Rainforest Action Network's Jason Opeña Disterhoft said in a statement.

What we're watching: The next steps in Wall Street's climate efforts.

  • JPMorgan, for instance, is planning to set 2030 emissions targets for its financing portfolio, with sector-based targets planned for oil-and-gas, manufacturing and more.

Driving the news, part 2: Politico obtained a draft of the planned White House executive order on tackling climate-related financial risks.

  • It sets a timeline for Treasury Secretary Janet Yellen to assess climate risks to the financial system.
  • Other provisions, per Politico, include having the Federal Retirement Thrift Investment Board weigh the risk of continued investment in fossil fuel securities.
  • The reportedly planned executive order (the White House declined to comment to Axios) comes as independent financial regulators are also increasing their activity.
  • The Securities and Exchange Commission is moving toward mandatory climate risk disclosure rules, while the Federal Reserve is deepening its exploration of financial system risks.

But, but, but: The draft order as reported by Politico is notable for going far beyond financial regulators.

  • For instance, "The departments of Housing and Agriculture will be asked to consider integrating climate-related financial risk into their underwriting standards and loan conditions," they report.
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