What Banks Can Do to Foster a Low-Carbon Future

What Banks Can Do to Foster a Low-Carbon Future

Editor's Note: Bank of America sponsored the launch event for the Carbon Disclosure Project's report at Climate Week NYºC 2010, where strategies for financing a cleantech revolution were a central conference theme.

As political, business and non-profit leaders gathered in New York for Climate Week to network and compare notes on their progress in managing their own carbon emissions as well as working with clients and partners on reducing their carbon footprint, Bank of America released its Environmental Progress Report that detailed delivery of $8.4 billion on our 10-year, $20 billion commitment to address climate change through our lending, investing, products and services and our own operations.

Much of that activity focused in two critical areas: renewable energy and energy efficiency.

As one of the largest financial institutions in the world, we understand the critical role we can play in helping to create the economies of scale required to build a low-carbon economy. At the same time, we recognize that this transformation is a complex endeavor that requires choices and actions by us all -- individuals, communities, businesses, governments and non-governmental organizations.
One Bryant Tower
Banks, like any other company or industry, can make an impact by reducing our own carbon footprint and through philanthropy and community involvement. But at the very core of what financial institutions do -- lend, invest and create market activity -- lies the power to mobilize intellectual and financial capital to commercialize and implement renewable and low-carbon energy and promote energy efficiency.

When banks lend, invest and introduce new products and services, they can create new businesses, technologies and jobs while building healthier communities. Tackling climate change is more than doing good for its own sake. For us, it has proven a long-term and highly compelling business opportunity both for us and the clients and communities we serve.

Whether this means one of our subsidiaries financing the retrofitting of the U.S. Capitol with energy-efficient lighting, heating and cooling equipment provided by one of our clients, Ameresco -- one of the largest installers of such equipment in the country -- or closing a $27.5 million loan to the Aventura, Florida-based Trump Group for building not just the largest industrial facility in the U.S. but one that will soon seek LEED-Silver certification from the U.S. Green Building Council, or financing a lease to facilitate the installation of solar systems at seven Walmart and Sam's Club retail locations in Southern California, all of these projects collectively contribute to the inevitable transition to a low-carbon economy.

At the same time, these deals and others like them have been moving forward in the absence of a national or global regulatory framework that will -- we hope -- one day soon provide a tipping point that will make millions more similar transactions more clearly economical for clients and society as a whole.

Even as much is being done at our company as well as at countless other firms around the world, we clearly have much more work to do before the transition to a low-carbon economy can be regarded as an irreversible reality. As an industry, the absence of a clear-cut international regulatory framework that would put a price on carbon remains by far our greatest challenge, because the global market for energy efficiency, renewable and other low-carbon energy and will likely remain immature and underdeveloped in the absence of such a policy.

Government and regulatory actions aside, we recognize that the financial services sector has a critical long-term role to play in working with clients to help them more clearly comprehend the opportunities, uncertainties and risks inherent in pursuing low-carbon energy and energy efficiency solutions.

Here are some examples of these challenges:

Enhancing Environmental Products and Services

On the consumer products front, we still have a long way to go as an industry in providing consumer products that will comprise a true market for environmental goods and services. For a variety of reasons, many of these products have yet to gain traction with a critical mass of customers and clients.

On the investor front, while we have seen an increase in interest for low-carbon or socially responsible investment (SRI) activity on the part of both individual and institutional clients, the need exists to continuously improve and refine the research, insights and guidance to support those investors interested in rebalancing or re-weighting their portfolios to take advantage of these emerging themes.

On the institutional front, many financial services clients still need to be appraised of the broad business case for making significant investments in the development of a low-carbon economy. For investors, regulatory and technology uncertainty is seen to be impacting the ability to accurately estimate certain long-term investment returns, and it's important for our industry to work closely with all involved to drive greater clarity where possible.

If advancing a low-carbon economy will have the desired impact of mitigating the effects of climate change it will require the involvement of all industry sectors, and despite the size of some of the upfront costs of investment, or the potentially prolonged horizon for investment returns, we need to find improved mechanisms and approaches to catalyze investment on a broader scale.

Measuring Business Impacts

As an industry, we need to do a better job of understanding the measurement of our business impacts related to emissions, and that greater transparency and reporting -- as so effectively promoted by the Carbon Disclosure Project -- will eventually lead to significant reductions in carbon emissions.

Opportunities Ahead Too

While we see challenges, we continue to see enormous opportunities as well. At Bank of America, virtually every line of business is helping companies large and small as well as individual consumers to realize real returns on energy efficiency and renewable energy every day, and to recognize the tangible benefits that will flow directly to their bottom lines if they pursue energy efficiency and renewable energy solutions to their operational requirements and investment objectives.

As significant financial institutions, every time we help our clients find cost-effective solutions to address climate change we're setting opportunity in motion to help advance global economic recovery. For example, while much of the U.S. real estate market has been challenged, McGraw-Hill Construction estimates that green building will account for over one-third of new construction in the U.S. by 2013, up from 2 percent in 2005.

A 2009 study released by The Pew Charitable Trusts further found that the number of jobs in America's emerging clean energy economy grew nearly two and a half times faster than overall jobs between 1998 and 2007, growing at a national rate of 9.1 percent, while traditional jobs increased by only 3.7 percent between 1998 and 2007. Research has shown that clean energy investments at the level of about $150 billion per year can generate around 1.7 million net new jobs throughout the economy, including nearly half that are accessible to workers with relatively low formal educational credentials.

While we celebrate our successes, we recognize that the ultimate responsibility for safeguarding our global energy independence and security rests with policy leaders to find and implement the most creative and effective market-based solutions. This will, in turn, catalyze individuals and businesses to take the collective action needed to build a more fully functional low-carbon economy.

Anne M. Finucane is the global strategy and marketing officer for Bank of America, where she directs public policy, government affairs, consumer policy and corporate social responsibility, along with advertising, corporate communications and research. She also chairs the Bank of America Environmental Council, overseeing the company's 10-year, $20 billion business initiative to address global climate change.

Articles, analyses and resource material about the
Climate Week NYºC 2010 conference, which ran September 20 through 26, are available at: www.greenbiz.com/topic/climate-week-nyc-2010. For more information, visit www.climateweeknyc.org.

Top image for photo illustration CC licensed by wikimedia user Ryan Browne, Cook+Fox Architects. Photo credit for inset image: Cook + Fox via Bank of America.