6 banking giants demand strong COP21 deal, pricing carbon

6 banking giants demand strong COP21 deal, pricing carbon

NEW YORK CITY — The six largest U.S. banking institutions on Monday called for a “strong global climate agreement” and policies that “recognize the cost of carbon.”

JP Morgan Chase Bank, Bank of America Corp., Wells Fargo, and Citibank — the four largest commercial banks with assets of $6.5 trillion according to Federal Reserve data — along with Goldman Sachs and Morgan Stanley, the largest and second largest investment banks with $1.1 trillion in managed mergers and acquisitions — also committed to provide “significant resources” to finance climate solutions.

At a press conference in New York, officers from these banks issued their open letter, timed to coincide with the start of the United Nations General Assembly's new session for which climate change and sustainable development dominate the agenda. This  current UN meeting is seen as a chance to forward hopes for a climate deal at the COP21 UN Climate Convention in Paris later this year.

The banks described a “business opportunity” in financing a low-carbon economy  and minced no words that they also view global warming as indeed happening, and threatening prosperity.

Scientific research finds that an increasing concentration of greenhouse gases in our atmosphere is warming the planet, posing significant risks to the prosperity and growth of the global economy,” the banks wrote and released at a meeting organized by the CERES investment network.

“As major financial institutions, working with clients and customers around the globe, we have the business opportunity to build a more sustainable, low-carbon economy and the ability to help manage and mitigate these climate-related risks,” they wrote.

Their strong, unequivocal words ring out against the backdrop of a presidential campaign in which candidates of one party have said in national debate that trying to stem global warming and reduce carbon emissions would hurt the economy. And in Congress, climate change is still a political football, with Senate Majority Leader Mitch McConnell vowing to prevent the U.S. from committing to a UN Climate Convention agreement to reduce carbon emissions.

Citibank's Valerie C. Smith, director and head of corporate sustainability, said the banks' action reflects both a transition in the market towards low-carbon solutions and their sense of a responsibiilty to "accelerate that transition."

“We are financiers of the global economy," Smith said about Citi, and likely about the group of powerful banks generally, speaking to a gathering of officials and reporters organized by Ceres, the investor network and sustainability advocate.

"We’ve always been clear that fossil fuels are part of global economy, but we also are seeing transitions" and imperatives. "We are all about climate partnerships," she continued. "We are seeing clients move really quickly to transition" to clean power. The group statement, Smith said, "is meant to accelerate the transition."

 Anne Kelly, senior director of policy at Ceres said these six banks are fierce "competitors" in the marketplace "so to have them come together to make a statement like this," is a big deal.

Carbon pricing?

The banks’ call for “policies that recognize the cost of carbon” is most perhaps most noteworthy.

But at the briefing, the sustainability directors of the banks said they were not advocating a specific policy, not specifying, for insteance, the governments should put a price on carbon or institute a cap and trade system, but rather just that they recognize the need for carbon to have a cost — and leave the details on policy up to elected officials.

Marisa Buchanan, JP Morgan Chase vice president for sustainable finance, told a Ceres gathering in New York that the banks made the phrase purposely vague.

"We were deliberately vague to not have one policy solution," in the letter. She said numerous policies could accomplish it and in fact a "suite of policies" is what will emerge from COP21. "Different policies can recognize that carbon has a cost. It doesn't mean you have to put a tax on carbon or have a cap nad trade system. We were purposely policy vaue, but we do recognize that carbon has a cost."

Scientists — and an increasing number of companies — have called for putting a price on carbon, with 437 companies pricing carbon use in their internal operations. But few politicians from either party have been willing to call for national policy that price carbon, such as a cap and trade system or tax would do. 

Many scientists have argued that no appreciable dent in carbon emissions will happen until some economic cost is assigned to carbon emissions – and therefore economic value assigned to carbon reductions.

The banks are agreeing with that premise, saying that investment in innovations and possible solutions needs the driving power of value.

“Policy frameworks that recognize the costs of carbon are among many important instruments needed to provide greater market certainty, accelerate investment, drive innovation in low carbon energy, and create jobs,” the banks said.

Despite a history in the banking industry of being against regulation, these banks want a solid pact from the COP21 UN Conference of Parties negotiations.

“We call for leadership and cooperation among governments for commitments leading to a strong global climate agreement," they wrote.

Why and how

The sustainability directors of the six banks spoke of the transition underway in the economy, their own growing involvement in financing sustainability, and their sense that market forces would be unleased with some clearaer policy.

Bank of America's Ashwani Chowdry, senior vice president of the global environmental group, said the market for clean energy finance and other low carbon projects "is growing exponentially."  

Like other banks in the group, Bank of America has commmitted to make more than $100 billion available in green bonds to finance clean energy and other projects.  

It is also a financier in the Green Climate Fund. "The idea is to provide funding to leverage more public-private" projects, bolstering available public money with private bank financing.

But all of them said this market would get a significant boost from clear, set policies of the type they hope will emerge from COP 21.