On Wednesday, the nonprofit Risk Management Association announced it had corralled 19 banks into joining the RMA Climate Risk Consortium, with the goal of developing “standards for banks to integrate climate risk management throughout their operations, preparing the industry to help economies transition to a low-carbon future.” Altogether, members of the consortium have furnished $765.7 billion to fossil fuel projects since the Paris Agreement was brokered in 2015. Speaking to The Wall Street Journal about the announcement, RMA president and chief executive Nancy Foster relayed that it was “too soon to know exactly how the consortium’s work might affect an individual bank’s policies.”
The $765.7 billion figure comes from data compiled for the 2021 “Banking on Climate Chaos” report, by the Rainforest Action Network, Banktrack, the Indigenous Environmental Network, Oil Change International, Reclaim Finance, and the Sierra Club. The report lists the 60 top banks showering cash onto coal, oil, and gas projects: $3.8 trillion in total since 2015. Five consortium members appear on the list. Wells Fargo, Bank of America, and the Royal Bank of Canada—all featured prominently in promotional material for the consortium—are ranked third, fourth, and fifth. Fellow consortium members MUFG and U.S. Bank were sixth and thirty-ninth, respectively. If they were a country, just 18 major banks and asset managers—including Bank of America and Wells Fargo—would be the world’s fifth-largest polluter, according to another study from the Center for American Progress and the Sierra Club. Between 2016 and 2020, consortium members Truist, U.S. Bank, Bank of America, and MUFG have increased their financing of fossil fuels. The Royal Bank of Canada and Wells Fargo decreased their fossil fuel financing over that time.
Mary Obasi, climate risk executive at Bank of America, which financed $198.5 billion worth of coal, oil, and gas projects between 2015 and 2020, hyped the Climate Risk Consortium to The Wall Street Journal, saying, “When you think about climate change, and then you think about what the science is telling us is going to happen, it will literally have implications and impact across a broad spectrum of industries across a broad spectrum of geographies.” Yet Wall Street banks aren’t nonprofits out to save the world. They raked in record profits last year. JPMorgan Chase, Goldman Sachs, Morgan Stanley, and Bank of America are expected to report their highest-ever full-year profits by the end of the month.
Besides the money they devote to fossil fuels, U.S.-based banks have also generously funded the campaigns of politicians who have been diametrically opposed to passing climate legislation—namely, the entire Republican Party. Bank of America donated $1.34 million to Republican candidates in the 2020 cycle, including $10,000 to several Republican candidates for Senate to help maintain GOP control there. The current makeup of the Senate is one of the main reasons even the relatively small sums the Biden administration wants to spend on climate change are being held up right now. Many of the same politicians who block emissions-reductions measures just happen to oppose stricter financial regulations, too.
News of the consortium’s formation comes as interest in climate-related financial regulations is seeping into the mainstream of top economic policymakers, however slowly. Freshly reappointed Fed Chairman Jay Powell told the Senate Banking Committee this week that climate stress tests would be “a key tool going forward.” This year, the Securities and Exchange Commission is due to release “clear rules for the road” as to what publicly traded companies should tell their investors about their emissions targets and the risks they face from climate change. The Biden administration is reportedly considering appointing former deputy treasury secretary and Federal Reserve Board of Governors member Sarah Bloom Raskin to be the Fed’s vice chair of supervision, where she would be in charge of oversight of the country’s biggest financial institutions. She’s long advocated for the world’s most powerful central bank to take the climate crisis more seriously. Raskin wrote in a New York Times op-ed two years ago that Fed policies—unlike its bond-buying program—“should build toward a stronger economy with more jobs in innovative industries—not prop up and enrich dying ones.”
Ranking Republican Senate Banking Committee member Pat Toomey—who would have a major say in confirming Raskin and has already accepted $128,000 from commercial bank PACs this campaign cycle—warned this week that Raskin had advocated to “pressure banks to choke off credit to traditional energy companies and to exclude those employers from any Fed emergency lending facilities,” and that he had “serious concerns” she would “abuse the Fed’s narrow statutory mandate.” Throughout his time in the Senate, Toomey has accepted $884,142 from energy and natural resources company PACs and $2.9 million from the financial sector, insurance, and real estate firm PACs.
If the politicians that banks fund are determined to ward off stronger climate-related financial regulations by any means necessary, then banks’ participation in efforts like the RMA consortium and the Net-Zero Banking Alliance is a smart play: Offer a friendly green face while continuing to hand over billions to the companies wrecking the planet.