Is the largest bank in the US doing enough to combat climate change?
JPMorgan Chase – the largest bank in the US – is also the lead financier of fossil fuels. Read on to learn about the role banks play in the energy transition.
By Ellie Kim Fromboluti
Last Updated: May 3, 2024
Originally Published: October 9, 2022
Summary of updates for May 2024
JPMorgan Chase (JPMC) remains the leading financier of fossil fuels. Since the original post (updated throughout, below), JPMC has made little progress in reducing its funding of fossil fuel projects and remains without a concrete plan for reducing its financed emissions.
Key takeaways: In 2023 the bank introduced a new "energy mix" metric that combines clean energy funding with fossil fuel emissions data, raising concerns about transparency and greenwashing. Environmental groups criticize the effectiveness of the bank’s recent commitments, highlighting JPMC's reliance on self-reporting by clients to reduce methane emissions in the oil and gas sectors.
Read on to learn the latest about JPMorgan Chase's climate commitments.
There’s no question that we need to take action on climate change now if we’re going to avoid irreversible damage to our planet. The recent UN IPCC Report on Climate Change Mitigation says we need to take aggressive action to limit global warming, and net zero targets aren’t enough. To limit global warming to 1.5 degrees in line with Paris Climate Agreement goals, we need a credible plan to get there – that means backing up net zero pledges with ambitious but achievable targets to reduce global greenhouse gas (GHG) emissions.
In the US alone, fossil fuel combustion accounted for 73% of CO2 emissions in 2021. A crucial step in slowing climate change is to end our reliance on fossil fuels and transition to renewable energy sources. To do this, the International Energy Agency (IEA) calls for a freeze on funding for all new fossil fuel projects, amongst other actions.
JPMorgan Chase is not only the largest US bank but also a lead financier of fossil fuels, having funded $434 billion between 2016-2022. With effective policies to phase out fossil fuel financing from major banks, fossil fuel companies would be forced to transition their business models.
Banks profit from fossil fuels, but unlike oil and gas companies, they would not have to enact major changes to their existing business models to stay afloat. So why don’t they take more drastic measures to divest from fossil fuels?
Bank leadership makes these decisions
As Chairman and CEO of JPMorgan Chase, Jamie Dimon wields the power to maintain the status quo, but also the responsibility to push for change. However, contradictory words and actions cast doubt on his commitments.
On the one hand, Dimon has pledged support for the Net Zero Banking Alliance (NZBA) — committing to net zero emissions by 2050. Several other claims of climate-forward policies are described in Dimon’s 2021 Annual CEO letter and in JPMorgan’s 2021 Annual Report and Proxy. These include a 10-year commitment of $1 trillion towards climate action, setting Paris-aligned carbon emissions intensity reduction targets, and working with clients to improve carbon disclosures and reduce emissions. In 2020, the bank founded a Center for Carbon Transition, which “provides clients with financing, research and advisory solutions to support them in their transition to a low-carbon future.” Across investments, the bank claims to be working to develop and operationalize emissions reduction targets.
On the other hand, Dimon has proposed a “Marshall plan” for energy in response to the war in Ukraine. Dimon calls for an increase in US production of natural gas to export to Europe. World political conditions create energy insecurity, reducing confidence in renewables in the energy transition. Fossil fuels – specifically, natural gas – are a comparatively quick fix. Maybe it’s not surprising that the US is projected to increase its natural gas production in the coming years.
Although JPMorgan Chase has set targets attempting to align with the Paris Climate Agreement, it has set intensity-only targets, which remain “...compatible with expansion of fossil fuels and increases in absolute emissions,” according to a recent report by the Rainforest Action Network. Focusing on lower-emissions energy sources leaves open the possibility of increasing emissions relative to current investments. The bank does not specify emissions targets for individual clients – meaning it can continue funding big GHG emitters.
JPMorgan Chase’s latest 2023 Climate Report represents little progress compared to past years. Moreover, the report introduces a potentially misleading new metric for measuring emissions, the "energy mix target." While the report emphasizes increased funding for renewable energy, environmental groups have raised concerns about the overall effectiveness of JPMC’s strategy.
Transparency and greenwashing concerns
A primary criticism centers on JPMC’s new "energy mix target." This metric combines data on clean energy financing with data on fossil fuel emissions. While JPMC presents this as a holistic view, this new metric makes it hard to track year-on-year progress in reducing emissions from fossil fuels. This lack of transparency raises concerns about greenwashing.
Client accountability and limited scope
Another area of concern involves JPMC’s strategy for reducing methane emissions in the oil and gas sector. Their approach relies on encouraging clients to reduce emissions through self-monitoring and reporting but does little to hold clients accountable.
Moreover, while JPMC’s current focus on methane emissions from oil and gas operations is an easy and cost-effective first step for monitoring emissions, this approach neglects the significant contribution of liquefied methane gas to overall methane emissions.
And, it’s worth repeating that JPMorgan continues to be the top financier of fossil fuels. This fact remains unchanged as of this update (May 3, 2024).
Trouble from shareholders
In 2022, climate-conscious shareholders who do not approve of continued investment in fossil fuels proposed two resolutions that were considered at JPMorgan’s annual meeting of shareholders. The first asked the bank to end support for new fossil fuel projects (Proposal 4), in line with a recent report by the IEA. The second requested that the bank set absolute contraction targets (Proposal 9), in line with recommendations by NZBA and the UN Environment Programme Finance Initiative (UNEP FI).
The Board of Directors objected to the proposals on the basis of already doing enough to address climate change without creating energy insecurity. Further action, it states, is at the discretion of bank management, which is “best positioned” to make these crucial decisions.
While the bank management asserts that the financial risk of suddenly pulling out of the fossil fuel industry is too great, continued investment in fossil fuels may actually be financially risky. Not only does current funding of fossil fuel projects lock in harmful emissions trajectories into the future, but renewable energy projects are also on the rise and may present a better long-term investment.
The current vote did not adopt either of the proposed resolutions. However, the proposals received 10% and 15% support, respectively. This is enough support that the issues cannot be ignored, and may be proposed again at next year’s meeting.
Update for May 2024
Two similar resolutions were proposed for the 2023 annual meeting of shareholders. Sierra Club again proposed that JPMorgan phase out fossil fuel funding (Proposal 6), motivated by environmental and climate-based financial risk evidence. This proposal received 8% support.
In addition, As You Sow’s resolution (Proposal 9) requested the bank lay out an actionable transition plan to deliver on its 2030 decarbonization targets. This proposal received 35% support, indicating strong support for a more concrete plan from the bank.
Four actions JPMorgan Chase can take to support its claims
Here are the top four actions JPMorgan Chase can take to position itself as a leader - rather than a laggard - in the energy transition.
- Follow through on its commitments by adhering to the IEA net zero roadmap to transition away from fossil fuels. For one, this means no new fossil fuel funding.
- Phase out all fossil fuel financing on a timeline consistent with a 1.5°C climate change target.
- Restrict financing coal projects now, as advised by the recent Rainforest Action Network report, with the intention of a full coal exit between 2030-2040 at the latest.
- Commit to reporting absolute emissions by joining the Partnership for Carbon Accounting Financials (PCAF) — a coalition of 260+ banks attempting to align the financial industry with the goals of the Paris Climate Agreement. PCAF facilitates banks in measuring and reporting their financed GHG emissions.
If JPMorgan does not back up its commitments with actions, it risks gaining a reputation for greenwashing.
What this means for you
In the end, JPMorgan can make claims of climate consciousness, but until they stop funding fossil fuels, these claims represent a failure to lead the energy transition.
Regulatory pressure on banks can either facilitate or slow down the energy transition. Get involved and watch out for federal and state legislation requiring banks to lend to fossil fuel projects.
Take a closer look at your bank and investments - GreenPortfolio can help. We offer some green banking options.
Editor's note: GreenPortfolio is partnering with Climate & Capital Media to support our efforts to bring transparency to the relationship between finance and climate change for American consumers. This article is based on GreenPortfolio’s interpretation of their recent work.
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