Wall Street’s big green flip-flop
Big banks promised to protect the planet. Now they’re doing an about-face.
When a small group of climate protesters logged on to a Zoom meeting in early July to speak with Citibank’s top sustainability executives, their emotions ranged from cautious optimism to guarded skepticism.
Protesters from groups like Stop the Money Pipeline, Climate Organizing Hub, and Planet Over Profit spent weeks barricading the doors of the bank’s New York City headquarters as part of their “Summer of Heat on Wall Street” campaign. After a string of arrests and confrontations with employees, all of which coincided with three blistering heat waves, Citi’s invitation to talk was welcome. Organizers from the climate groups viewed the meeting as a chance to speak frankly with Citi execs about their role in the climate crisis. But protesters said the meeting only reemphasized the gap between Wall Street’s actions and the lofty promises the industry made in 2021 to reduce the carbon footprints of their portfolios. Marlena Fontes, the organizing director of Climate Organizing Hub and Climate Defenders, pointed to an exchange over the new liquified-natural-gas terminals under construction along the Gulf Coast.
“We know these LNG ports are like huge carbon bombs,” Fontes said. “We asked them, ‘Will you commit to stop financing the construction of new LNG terminals? And they said they would not talk about any of their current projects or financing. They refused to answer the question.”
A Citi spokesperson said the activist groups have “been given many avenues to engage constructively but instead they continue to pursue acts of intimidation, trespassing and vandalism.” The spokesperson also defended the bank’s current climate efforts: “We work with our clients as they decarbonize their businesses while also meeting the energy needs of today.”
Climate activists blocked the entrance of Citibank headquarters during a protest on August 16 in New York.
The face-off was a microcosm of Wall Street’s recent backsliding on its climate ambitions. Big banks and asset managers like Citi and BlackRock touch virtually every part of the global economy through loans, investments, and other financial services. That makes them a powerful force for cutting greenhouse-gas emissions. CEOs for Wall Street’s biggest firms embraced that role in 2020 and 2021: They warned about the risks of the climate crisis and pledged to use their financial influence to push the world toward net-zero emissions. While these firms are spending record amounts on climate solutions like renewable energy, some have since retreated from climate alliances and are reluctant to crack down on companies boosting oil, gas, and coal supplies and building new infrastructure to carry them around the world.
Climate advocates say Wall Street’s flip-flop mainly boils down to politics and profits. US firms are trying to shake off attacks by Republican politicians railing against “woke” capitalism. GOP officials at various levels claim that Wall Street’s participation in certain climate alliances amounts to collusion against fossil fuels and is a violation of antitrust laws. Meanwhile, short-term profits reign supreme on Wall Street, and the oil and gas industry continues to be high risk, high reward. After the start of Russia’s war in Ukraine in 2022, gas prices soared as Europe clamored for US supplies of the fuel, leading to a record $200 billion in profit for Western oil and gas companies.
Given all these factors, it’s not that surprising that some firms are backtracking, said Adair Turner, the chair of the Energy Transitions Commission, a think tank focused on climate action and economic growth that counts banks such as HSBC and Bank of America as members.
“Companies can be very powerful drivers of change, and they can help convince politicians what’s possible,” Turner said. “But if there is a big backsliding on the political side, you will see a big backsliding on business as well. That’s just the world we live in.”
When Wall Street’s biggest firms made their net-zero promises, the oil and gas industry wasn’t doing so hot. The COVID-19 shutdowns had triggered the third major energy-price collapse in a dozen years, and corporate America woke up to the risks that climate-fueled disasters posed to their investments. In his closely read annual letter to shareholders in 2020, BlackRock CEO Larry Fink, whose firm manages more than $10 trillion in assets and is one of the largest shareholders in many companies, said his firm was putting climate risk and sustainability at the center of its investment approach and would increasingly hold corporate boards accountable for not disclosing and managing climate risks. Bank of America won praise from climate advocates when it said it would no longer directly finance new coal mines, coal-fired power plants, or Arctic drilling projects. Citi CEO Jane Fraser told The Wall Street Journal in December 2021 that meeting net-zero goals may mean cutting off some clients. Beyond individual efforts, Wall Street also came together in collective climate initiatives. The investor group Climate Action 100+ pressured companies to disclose their climate risks and emissions. The Glasgow Financial Alliance for Net Zero convened in 2021 and required members to commit to net-zero emissions, have a science-based plan for how to get there, and regularly report progress. Firms representing some 40% of global financial assets joined, including Citi, JPMorgan Chase, Bank of America, BlackRock, State Street, and Vanguard.
I have seen a lot of these companies get very excited about scaling up climate-solutions investments and lose sight of the importance of bringing down fossil-fuel emissions.
Brad Lander, New York City comptroller
But by 2022, cracks began to emerge. That year, GFANZ dropped a requirement that members align with the UN Race to Zero campaign after it required more aggressive climate actions, including phasing out financing for new fossil-fuel assets that weren’t paired with carbon-capture technology. People familiar with the fallout told B-17 that GFANZ members were blindsided by the changes and didn’t want to be beholden to criteria created by a small group of UN experts.
Individual banks have also adjusted some of their climate policies. Bank of America in late 2023 quietly dropped its policy on coal and Arctic drilling and said it would instead subject those projects to “enhanced due diligence.” That year, BlackRock also appointed Saudi Aramco CEO Amin Nasser to its board, who recently said, “We should abandon the fantasy of phasing out oil and gas.” Even Fink, in his latest letter to investors, emphasized “energy pragmatism,” where countries don’t have to choose between renewable energy or fossil fuels but can have both, albeit less of the latter. Earlier this year, BlackRock scaled back involvement in Climate Action 100+ by transferring its membership to an international subsidiary, while J.P. Morgan Asset Management, State Street, and Goldman Sachs Asset Management all quit the group as it started a “phase two” strategy focused on investors asking companies to reduce emissions.
In general, Wall Street views activists’ requests as unrealistic and a poor reflection of the real economy. They firms argue that there’s only so much a private financial institution can do when most governments aren’t enacting policies to drastically slow demand for fossil fuels. Banks also can’t dictate how and when companies decarbonize. Asset managers invest money on behalf of clients, who may or may not decide that the climate crisis is worth factoring into where they put their money.
JPMorgan CEO Jamie Dimon wrote a letter in April to shareholders that said stopping oil and gas projects was “wrong” and “enormously naive,” calling out President Joe Biden’s decision to pause the approval of new LNG terminals. Replacing coal, the most polluting fuel, with gas is one of the best ways to reduce carbon emissions, he said, and LNG exports are an economic boon for the US. While those comments weren’t surprising — Dimon has long argued that oil and gas will need to stick around as the energy sector transitions — his vision for the bank’s climate commitments did raise some eyebrows. Dimon indicated JPMorgan would use the word “commitment” less when discussing its climate goals and focus more on “aspirations,” in part because he said the financial sector could do only so much without more government action. The statement suggested JPMorgan was walking back its role in addressing the climate crisis, raising alarm among impact investors, climate advocates, and US Senate Democrats — who sent a letter accusing Dimon of losing faith in the private sector’s ability to solve problems and said he owed the public an explanation.
When asked for comment, JPMorgan, Bank of America, Citi, and BlackRock told BI that they remained committed to their net-zero plans. Dimon, in his April letter, said JPMorgan departed Climate Action 100+ because the bank now has its own environmental, social, and governance experts, while BlackRock issued a statement in February saying most of its clients with net-zero targets were in its international business. Citi, in a June letter to employees about the protests, said that it had deployed $440 billion in sustainable finance across a wide variety of areas, including renewable energy, with an aim to hit $1 trillion by 2030, and that emissions tied to its energy portfolio had fallen.
“Banks’ core role in the economy and the energy transition is facilitating access to capital,” a JPMorgan spokesperson said, citing the bank’s $1 trillion climate-finance target for 2030. “We are proud of our ability to support our clients in their efforts towards a low-carbon, energy-rich future.”
A BlackRock spokesperson said the firm’s role is helping clients meet their unique investment goals and that assets in BlackRock’s sustainable strategies had grown by more than 760% over the past five years. The firm also launched an option in July for clients who want their money to align with decarbonization.
A Bank of America spokesperson said the company is supporting clients across the traditional and renewable energy sectors to drive innovation and help them meet transition goals. Bank of America has deployed $560 billion in sustainable finance with a goal to hit $1.5 trillion by 2030.
Some climate advocates said that the backsliding was deeply alarming, while others said the moves were more about managing optics to temper criticism from politicians on the right who could have more power if former President Donald Trump wins in November. Either way, Wall Street isn’t acting fast enough, they said, and is spending too much time touting their green investments, while ignoring their unwillingness to stop providing massive amounts of funding for fossil fuels.
“I have seen a lot of these companies get very excited about scaling up climate-solutions investments and lose sight of the importance of bringing down fossil-fuel emissions,” New York City’s comptroller, Brad Lander, whose office oversees the investment of $242 billion in city pension funds, told me. “That’s especially distressing at a firm like BlackRock because they’re the biggest public-markets player. They are one of the largest investors in many of the highest-emitting companies. They need to demand real progress.”
Lander said he was encouraged by agreements his office reached this year with JPMorgan, Citi, and Royal Bank of Canada for the banks to publicly disclose the ratio of money they put into clean energy versus fossil fuels. To prevent the world from warming to catastrophic levels, the International Energy Agency estimates, global investments in renewable energy need to outpace fossil fuels this decade by 4-to-1. In June, the agency said the ratio across financial institutions globally would be 2-to-1 this year in favor of renewables. The ratio at North American banks as of 2022, according to BloombergNEF, was about 0.7-to-1. That ratio has likely changed after tax breaks under the Inflation Reduction Act helped attract hundreds of billions of dollars of investment in the energy transition, but it’s hard to know by how much because banks don’t share their individual data. Lander said the new agreements would make it easier to see which banks are on track to meet their emissions-reduction pledges and which are not. This could, in turn, help the city’s pension funds achieve net-zero emissions across their portfolios.
There are some early signs that Wall Street may be turning a corner. The world’s 60 largest banks collectively provided fewer loans and financial services to the fossil-fuel industry for two years in a row, 2022 and 2023, the Banking on Climate Chaos report compiled by a network of climate groups said. But April Merleaux, a research manager at the Rainforest Action Network that spearheads the report, said she’s skeptical the decline is here to stay for several reasons. Nearly half of those banks still increased financing between 2022 and 2023, she said. Oil and gas companies also didn’t need to borrow much money because they were sitting on so much cash following the global energy crisis. If that situation changes, there aren’t many restrictions on banks ramping back up their fossil-fuel financing, at least not in the US. In Europe, stronger ESG laws and climate lawsuits have led banks, including ING and BNP Paribas, to set more aggressive policies to phase out financing for oil and gas exploration and production.
Homes surrounded in floodwater in Surfside, Texas after Hurricane Beryl in July.
“What we hear from banks is that their intention is to guide their clients on a net-zero journey,” Merleaux said. “But that kind of engagement doesn’t have a lot of teeth. If a client is not making meaningful decreases in its fossil-fuel business, will the bank cut them off or raise interest rates on their loans or any number of actions the banks could take? In some cases, they may be doing that, but there’s no transparency.”
Citi disclosed earlier this year that 42% of its energy clients didn’t have a “substantive” transition plan, while 29% did have one, but it’s unclear whether they can execute their strategies. The bank said it would support clients in improving those plans.
Meanwhile, oil and gas production is on the rise. The US produced record amounts last year and is set to nearly double its gas export capacity by 2028, when at least five more LNG terminals could be online. More than a dozen more have been proposed, mainly along the Gulf Coast in communities that have long been exposed to polluting oil and gas infrastructure. The liquid natural gas is destined for China and India, where demand is growing, as well as Europe, though wind and solar are pushing out fossil fuels quicker than expected.
Oil and gas production should decline by 15% and 30%, respectively, by 2030 for the world to meet its climate goals, according to the IEA.
As emissions rise alongside oil and gas production, so do the risks of economic destruction. Hurricanes, flooding, wildfires, drought, and extreme heat are becoming more costly, inflicting hundreds of billions of dollars in property damage over the past few years. Some homeowners in Florida, California, and Colorado can’t find affordable insurance because the risks are too high. Prices for coffee, chocolate, and olive oil have spiked because of higher temperatures and unpredictable rain. Businesses were less productive in recent years because of scorching hot temperatures.
All told, the world could lose 12% of its GDP with every degree Celsius of warming above 1950s levels, a working paper by the National Bureau of Economic Research said. The insurer Swiss Re found in February that the US economy already loses 0.4% of its GDP annually because of severe floods and storms. The threat of financial losses makes Wall Street’s support for oil and gas expansion paradoxical. Without a rapid shift away from fossil fuels, their bottom lines could suffer in the long term. Yet transitioning too quickly also comes with its own set of risks, given how many countries still rely on fossil fuels to power their economies. Sure, financial institutions want to do the right thing, Turner of the Energy Transitions Commission said, but they worry that if they turn down oil and gas development, somebody else will finance it and take the profits. Governments have to step in to force Wall Street’s hand, he added, or a cycle of promise making and backtracking will continue — until it’s too late.
“Companies will always sit there with a tension between, ‘I want to make money, but I want to be able to look my grandchildren in the eye,'” Turner said.
