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Leveraging corporate cash to scale climate solutions

By leveraging financial relationships and resources, companies can accelerate the global finance transition toward "drawdown."

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The business community has access to enormous financial capital that can be powerfully deployed to shift the financial system away from carbon-intensive sectors and toward climate solutions and regenerative economic activity. By leveraging financial relationships and resources, companies can accelerate the global finance transition toward "drawdown" — the point in the future when levels of greenhouse gases in the atmosphere stop climbing and start to steadily decline. To become a "drawdown-aligned business," companies must begin to address the climate impact of their banking practices. 

Drawdown Labs, Project Drawdown’s private sector testing ground for accelerating climate solutions, recently hosted a webinar about decarbonizing corporate cash and investments. The webinar was co-hosted by the organizations behind the breakthrough report: The Carbon Bankroll, which uncovered the previously hidden climate impacts of corporate cash holdings; The Outdoor Policy Outfit (TOPO); BankFWD; and the Climate Safe Lending Network — in addition to Bank On Our Future, an international network of social movements working to pressure the biggest banks to align their business practices with a fair and habitable future.

Below, we’ve summarized key points from that discussion for employees or executives looking to reduce the greenhouse gas emissions associated with their company’s financial supply chain. (Editor’s note: To watch the full webinar, check it out here.)

1. Cash is not climate neutral

Banks use cash from businesses to support a wide range of enterprises, including industries causing climate change, such as fossil fuels and deforestation-linked agriculture. Since 2015, the world’s 60 largest commercial and investment banks have channeled $4.6 trillion into the fossil fuel industry, even though the science clearly tells us that we can build no new fossil fuel infrastructure if we want to keep warming below 1.5 degrees Celsius. The companies that partner with these large banks are culpable for that climate harm.

As an example, five years ago, Patagonia was actively supporting the water protectors' effort to halt the Dakota Access Pipeline when it realized that the banks directly funding the pipeline were some of Patagonia’s largest banking partners. In other words, those banks were lending a portion of Patagonia’s cash holding to projects that actively undermined the company’s values and mission. Since then, Patagonia has been on a mission to decarbonize its corporate cash. Patagonia is one of only a handful of companies tracking these impacts, let alone working to eliminate or ameliorate them.

Companies can influence the direction of those flows of finance into the real economy, to drive systemic change toward a green transition.
2. Finance is a key lever for climate action

For companies looking to make a climate-positive impact, finance-related climate actions are uniquely powerful.

As James Vaccaro, executive director of the Climate Safe Lending Network, explained in the webinar, "Banks make long-term credit decisions based upon people’s or companies’ short-term cash holdings. It's actually transforming day-to-day cash flows into the infrastructure and activities which are going to be around for decades to come. That pivot point right there is what makes this particularly interesting as a leverage point. Companies can influence the direction of those flows of finance into the real economy, to drive systemic change toward a green transition."

3. Companies must decarbonize cash to align with the Paris Agreement

Decarbonizing corporate cash is the process by which companies track and reduce the carbon intensity of their cash and investments. The most effective way to do this is by shifting all or some of a company’s cash holdings to banks with "Paris-aligned" lending practices, which tend to be smaller banks or fintechs.

Local credit unions also tend to have less carbon-intense lending practices, largely due to their size. If smaller banks and credit unions can’t provide the required banking services, companies should prioritize banks that have exclusion policies that limit how much they’re willing to lend to the most polluting industries, such as tar sands oil, coal-fired power plants and deforestation-linked businesses.

Importantly, all companies should engage with existing banking partners, ask them how they are managing climate risk and push them toward Paris alignment. Banks (if smart) will listen to their business clients. 

4. For a climate-leading company, reducing financed emissions should be top of mind

The Carbon Bankroll report found that a company’s cash can be one of its largest sources of emissions. For companies that have gotten serious about reining in their other sources of emissions, the carbon footprint of their cash may be one of the last chunks left to tackle.

Decarbonizing cash is a new frontier for corporate sustainability, and it can be a powerful practice for advancing broader climate action. Patrick Flynn, senior vice president and global head of sustainability for Salesforce, put it well during the webinar: "Any aspiring leader this year on Planet Earth needs to be putting as much effort as possible towards those strategies that have a chance to deliver impact at a speed and scale that Planet Earth can actually notice. Addressing financed emissions is one of those strategies."

Flynn notes that Salesforce knows its influence over suppliers, including financial institutions, can create change beyond its four walls. That's why the company unveiled a Sustainability Exhibit that requires suppliers to have a science-based target and emissions reduction plan, disclosing Scope 1, 2 and 3 emissions and delivering all services and goods on a carbon-neutral basis.

Roll of $100 bills

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5. Companies must extend the concept of supply chains to include financial supply chains

Most climate-concerned companies are tracking and attempting to reduce their physical supply chain emissions. During the webinar, Patagonia treasury director Charlie Bischoff described how the company made the leap from physical to financial supply chains: "Patagonia for decades has made a practice of engaging with our mills and factories around the world and trying to make sure we’re making clothing with the least harm possible. But as the climate crisis worsens and as we’ve changed our mission statement to ‘We’re in business to save our home planet,’ that’s tasked all areas of Patagonia to find ways to contribute. So I look at it as just an extension of the manufacturing supply chain due diligence work we've always done as a company. We're now expanding the scope of work to include our banks, insurance companies and investment companies, or our financial supply chain." 

6. Putting decarbonizing corporate cash in perspective

The U.S. Inflation Reduction Act allocates $369 billion in clean energy financing over 10 years. While significant, this amount pales in comparison to the $1.2 trillion that just JPMorgan Chase, Citi, Wells Fargo and Bank of America have invested in the fossil fuel industry since 2015 or the $742 billion that the world’s 60 largest financial institutions gave to fossil fuels in 2021 alone.

The financial system can move more money on faster time frames. That power must be harnessed so that the financial system no longer finances fossil fuels and deforestation but instead powers a transition to clean energy, transportation, buildings, industry, sustainable agriculture and well-being for all people. 

One of the things that we really look out for is, what are they doing on the sustainable finance side, but also what are they doing on the bad side in terms of funding environmentally harmful industries.
7. Tracking 'financed emissions' will become best practice

As outlined in the Carbon Bankroll report, companies have not historically included the emissions generated by their cash and investments in their reported corporate carbon footprints. This is about to change.

The Greenhouse Gas (GHG) Protocol already includes financed emissions in a company’s Scope 3, Category 15 emissions (apologies for the wonky terminology) — but until now companies have not been reporting these emissions due to data and methodological constraints. However, those methodological deficiencies no longer exist. This means companies can and should publicly report the emissions associated with their financial practices.

8. Beware of greenwashing 

As companies start to engage with banks, it is important that they watch for false sustainability claims and greenwashing. Bischoff has some useful tips: "A lot of banks will take sustainability as an opportunity to just market a product that is essentially no different than it was prior to adding a sustainability spin to it. So one of the things that we really look out for is, what are they doing on the sustainable finance side, but also what are they doing on the bad side in terms of funding environmentally harmful industries. And a really good proxy for that is looking at the ratio of clean energy lending to fossil fuel energy lending."

9. Take action
  • Measure your financed emissions. (To learn more about methodology, check out the Carbon Bankroll or contact TOPO or BankFWD.)
  • Ask your existing financial institutions about their climate transition plans, and make clear requests to incentivize better practices. If possible, bring someone from your company’s C-suite to this engagement so financial partners know you mean business.
  • Demonstrate demand for green finance.
    • Bank signaling: Allocate a portion of cash to banks that are fossil-fuel free, certified as a B Corp or members of the Global Alliance for Banking on Values (GABV). Or pledge to move it to the first major global bank to sufficiently align its practices with 1.5-degree Celsius goals.
    • Bank switching: Shift your banking service in whole or in part to small community banks or banks that have less exposure to fossil fuels and deforestation in their lending and financing portfolios.
  • Publicize your company’s action to send strong market signals and inspire others to follow your lead. Tell the story of your business taking action to bank better. 

Learn more about all the leverage points in the Drawdown-Aligned Business Framework and the broader work of Drawdown Labs, which works to democratize business climate action and raise the bar for climate leadership. If you work in finance, here is a checklist action guide tailored for you.

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