August 2, 2019

Time to Wake Up: Banking on Climate Change

As-prepared for delivery

Mr./Madam President, for a long time people opposed to climate action said that tackling climate change would be too costly, would harm economic growth, would be bad for American businesses, and would kill jobs. 

These were phony arguments, peddled by fossil fuel interests.  And they’re flat wrong.  Actually, the economic hazard is not action, but inaction.

[Chart 1: Economic warning organizations]

We’ve recently seen an explosion of warnings from economic regulators, central banks, insurers, investment firms, and risk analysts that we face economic peril if we fail to address climate change.  These are not green groups; these are business and economic experts, the people whose job it is to protect us from risks to financial stability; those who make a business calculation about what we stand to lose from unabated climate change.  Their warnings are many, and they are serious.

One example just last month is Moody’s warning that climate change will increasingly disrupt and damage critical infrastructure and property, and will hurt worker health and productivity across the globe.  This credit rating giant estimated 69 trillion dollars of economic damage globally by 2100, even if we limit warming to only two degrees Celsius.  We are currently on track for around three degrees of warming, which Moody’s said would put us at further risk of hitting tipping points beyond which lurk far larger, more lasting, and less predictable dangers.

Another example:  in May, the European Central Bank warned that climate change presents significant risks to the economy, to asset values, and to financial stability.  The longer we wait, ECB said, the more it will cost to protect ourselves in the future.  The ECB said that these risks could cause “systemic issues”, especially where markets do not price climate-related risks correctly.  “Systemic issues” is bland-sounding central banker-speak for this is so bad that it could take down the entire economy.  ECB is not alone; the Bank of England has been warning of “systemic risk” from climate for some time now.  I think we’re now over 30 sovereign banks who have made or adopted such warnings.

Just last week, Senator Schatz asked Fed Chairman Jerome Powell whether severe weather is increasing due to climate change.  He didn’t equivocate.  He said, simply, “I believe it is, yes.”  That’s the leader of the most influential bank in the world accepting without hesitation a major threat to our financial system—a threat to everything from coastal real estate values to stock market share prices.

America’s biggest financial institutions see that writing on the wall.  In the House Financial Services Committee hearing in April, CEOs from six of America’s biggest banks agreed that climate change is a serious risk to the financial system, and said that they are taking action to try to address that risk.

[Chart 2: Top fossil fuel financers]

There’s an unfortunate sidebar, however.   Big American banks that claim to support climate action include four of our biggest banks: JPMorgan Chase, Wells Fargo, Citigroup, and Bank of America.

These banks all supported the Paris Agreement.  In 2017, the CEOs of JPMorgan Chase, Citigroup, and Bank of America even signed a letter urging President Trump not to withdraw.

These banks are all trying to reduce their own emissions, and all have commitments to get to 100 percent renewable electricity.

All good steps. 

But the biggest direct impact these banks have on climate is through the investments they make.  On that score, they are steering us to climate calamity. 

A group of environmental organizations released a report in March adding up fossil fuel financing by 33 large private-sector banks from around the world.  These four American banks – JPMorgan Chase, Wells Fargo, Citigroup, and Bank of America — which all support the Paris Agreement and are reducing their own carbon emissions — are the four largest funders of fossil fuel projects.  Combined, they invested over 580 billion dollars in new fossil fuel projects over the past three years. 

JP Morgan was the worst, with 196 billion dollars of fossil fuel funding in three years.  JP Morgan was also the top U.S. funder of tar sands, arctic oil and gas, and coal mining – some of the most emissions-intensive fossil fuels.

The big American banks accounted for over a third of the surveyed global fossil fuel financing since the Paris Agreement was signed in 2015.

Worse, their investment in fossil fuel projects actually increased since the Paris Agreement.  Wells Fargo nearly doubled its fossil fuel financing from 2016 to 2018.

Obviously, these investments in new fossil fuel projects do not align with the banks’ stated support of the Paris Agreement.  The math doesn’t work.  The Paris Agreement aims to limit warming to well below two degrees Celsius, and to try to limit warming to 1.5 degrees Celsius.

A study just published by Nature showed that the world’s existing fossil fuel infrastructure will emit enough carbon pollution to blow us past 1.5 degrees of warming.  The authors wrote that “little or no additional CO2-emitting infrastructure can be commissioned” if we are to meet the Paris Agreement climate goals.

That’s the math.  If the banks are true to their stated support of the Paris Agreement, they should not finance any new fossil fuel projects, unless they also capture all the carbon emissions, and they’re not doing that.

It’s true that these banks have announced goals to increase financing of clean and sustainable projects.  But they’re only goals; and combined, even their goals only amount to around 100 billion dollars per year — about half what they actually invested in fossil fuel projects each year since Paris.

Citi even released a report finding that maintaining our current fossil fuel-heavy economy would cost more than moving to a clean, low-carbon economy.  And that’s without factoring in the economic damage from climate change, which Citi reckons could total $72 trillion under business as usual.  So Citi projects that transitioning to a low carbon economy is cheaper and avoids tens of trillions of dollars in economic damage. 

Yet they aren’t investing accordingly.

According to the International Monetary Fund, fossil fuels are subsidized to the tune of 650 billion dollars per year in the U.S.  There’s no question that this massive subsidy makes investing in fossil fuels highly profitable.  But the contradiction remains:  these banks all say they support the Paris Agreement; they all recognize that it is economically vital to reach the goals of the Paris Agreement; yet their investments would ensure that the Paris Agreement fails.

It would help banks change their ways if companies had to disclose their climate risks.  I just joined Senator Warren in a bill to require publicly traded companies to reveal their exposure to climate-related risks.  Armed with that information, investors could help drive investment away from the companies most exposed of all, fossil fuel companies.

But we have a proposal that will help them resolve the very root of the banks’ contradiction.  They ought to demand that Congress put a price on carbon emissions and an end to fossil fuel subsidies.

Indeed, JPMorgan Chase CEO Jamie Dimon said as much in the House Financial Services Committee hearing in April.  Asked whether his bank will phase out fossil fuel funding and align its investments with the goals of the Paris Agreement, he said “if you want to fix this problem, you are going to have to do something like a carbon tax.” 

So help us do it.

If bankers think climate is a serious problem, and that putting a price on carbon pollution is the solution, they need to fight to make it happen.  Banks have political influence.  Lord knows, they never stop throwing their influence around when it comes to financial regulations. 

So guys, talk is cheap — put a little effort into this.

Senators Schatz, Heinrich, Gillibrand, and I have a carbon fee bill that would help the banks align their investments with their goals.  It meets the key standards of being effective on carbon emissions, revenue neutral in the economy, and border-adjustable for trade.

Plus, it will help avoid the dreadful economic warnings now so frequently heard about doing nothing, whether warnings of coastal property values collapsing, or of a carbon asset bubble crash, or of big storms breaking the bank of the insurance system.

To Citi’s credit, it’s a member of the newly formed CEO Climate dialogue group, which will, I hope, become a strong advocate for a federal price on carbon pollution. 

But so far, the net pressure of corporate America in Congress remains hostile to climate action, both from indifference by companies themselves, and from the hostile presence of corporate trade associations like the U.S. Chamber of Commerce and the National Association of Manufacturers — outed as the two worst climate obstructors in Congress. 

A separate flotilla of front groups doing the dirty work of the fossil fuel industry adds to the corporate pressure against climate action from the Chamber and NAM.  So it would be great if these banks would take an interest in climate both in their investments in the market and in their influence in Congress.

The science is clear.  The economics are clear.  The warnings are serious, and many.  Neither our planet nor our economy can afford massive investments in new fossil fuel projects.  Time is short.  We can no longer afford corporate America AWOL in Congress.  It is time for these banks to wake up.

I yield the floor.