The Rocky Mountain Institute (RMI) is banking on banks to get us over the carbon-neutral finish line by 2050.
The nonprofit announced Wednesday that it’s partnering with four of the world’s largest financial institutions — Wells Fargo, Goldman Sachs, JPMorgan Chase and Bank of America — to launch the Center for Climate-Aligned Finance. The center will serve as a hub for cross-sector collaboration, bringing traditional financial instruments to innovative ideas to decarbonize the planet.
"It’s not the responsibility of any single country or single sector," said Paul Bodnar, managing director for climate finance at RMI. "But one sector provides the lifeblood that powers all the others and that’s finance."
A new buzzword, climate-aligned finance, is RMI’s answer to the uneven responsibility put on the financial sector. Its goal is to integrate the financial sector’s attempts at going green, including green business investments, exclusionary policies for certain fossil fuels and the industry’s ESG policies, into one complete strategy.
The Center for Climate-Aligned Finance will focus on four areas using RMI’s knowledge of sustainability in a variety of sectors and its deep understanding of the financial world. First, it will create specific, personalized initiatives for high-emitting sectors such as steel and cement production, utilities and the energy supply. Secondly, it will generate global frameworks on climate-aligned finance to guide other financial institutions around the world.
It's important that the tools we develop be as practical and commercial as possible.
"We really need tools now to take us from theory to practice," said Marisa Buchanan, head of sustainability at JPMorgan Chase. "It's important that the tools we develop be as practical and commercial as possible."
The center also will support individual institutions and shape public discourse in the financial sector as the two other main areas of focus.
According to Bodnar, while the strategy starts with advocating a vision of carbon neutrality for the highest energy-using corporations, it will need to be stewarded by the loans, grants and investments doled out by these large financial partners.
Wells Fargo has pledged to lend or invest $200 billion to sustainable businesses and projects by 2030. Goldman Sachs plans to help its clients transition into a climate-resilient model with $750 billion by 2030, and Bank of America is directing $300 billion towards these efforts as well. And in February, JPMorgan announced a goal to facilitate $200 billion in financing in 2020 for transactions related to climate action and the United Nations Sustainable Development Goals.
"To serve our clients requires really analytical tools," said John Goldstein, head of the sustainable Finance Group at Goldman Sachs. "Real technical chops required to do this work thoughtfully for analyzing, advising, financing and navigating."
While the banking industry has invested a lot into a green future where it sees an opportunity for job creation, profitable returns on innovative new companies and risk mitigation, it hasn’t seemed ready to walk away from the fossil fuels that built the sector’s wealth.
But pressure is mounting for the banks to overhaul their lending practices holistically. This includes a focus on solutions that will benefit vulnerable communities on the front lines of climate change that often have been overlooked by the environmental movement.
"The communities that are disproportionately affected by pollution from heavy industry, it is pretty well documented that communities of color and low-income communities tend to suffer the most," Bodnar said. "That is an urgent call for us to accelerate the transition out of the assets that are generating the most pollution."