Bank of America: Climate delayer
Bank of America has taken steps to address climate change, but its current plans are not sufficient to reach net zero emissions by 2050.
By Ellie Fromboluti
Last Updated: April 19, 2024
Originally Published: February 1, 2023
Next on our list of top US banks funding global warming, we discuss Bank of America (BofA) – the second largest US bank and fourth on the list of top fossil fuel financiers in the world. While BofA isn’t the top offender when it comes to fossil fuel funding (that honor belongs to JPMorgan Chase), it has contributed significantly to the $5.5 trillion in funding that big banks have provided to the fossil fuel industry since the Paris Agreement was adopted in 2016.
In this updated post, we revisit the climate claims of one of America’s largest banks to see how they stack up.
Stuck in neutral
Summary of updates for April 2024
While Bank of America (BofA) has taken a positive step in increasing its disclosures of Scope 3 financed emissions as noted in its 2023 activity reports, concerns remain regarding the bank's overall fossil fuel financing. An analysis of data from 2016 to 2022 reveals that BofA's total funding of fossil fuel projects has remained relatively stable or shown only a modest decline. Additionally, recent policy revisions have seen the bank retreat from some previous restrictions, no longer explicitly prohibiting financing for activities like coal mining and Arctic drilling.
#4 top financier of fossil fuels: Bank of America
Bank of America (BofA) is the second largest US bank, with $3.2 trillion in total assets, according to its 2023 Annual Report. BofA is ranked #4 globally in fossil fuel funding, having provided nearly $280 billion between 2016 and 2022 to fossil fuel companies and projects. Collectively, the top four banks funding fossil fuels account for 25% of all fossil fuel funding worldwide in the last six years (see our previous posts about the top three banks funding fossil fuels – JPMorgan Chase, Citi, and Wells Fargo).
BofA’s funding is far-reaching, and it continues to support companies expanding their fossil fuel operations. The bank funds a variety of fossil fuel projects – including offshore oil and gas, fracked oil and gas, and liquefied natural gas – and has a hand in fossil fuel financing around the world.
Bank of America’s commitments to climate change
Like other banks of its size, BofA has pledged to reach net zero emissions by 2050. Along these lines, BofA reports a 61% reduction in Scope 1 and location-based Scope 2 emissions in its operations for 2022 relative to a 2010 baseline. The bank has purchased carbon offsets equaling its total Scope 1 and market-based Scope 2 emissions between 2019 and 2022 and reports a reduction in many Scope 3 emissions relative to the 2010 baseline.
Notably, Scope 3, category 15 emissions (i.e., financed emissions) are not included in BofA’s 2022 ESG performance report. However, limited financed emissions are reported by sector (e.g., auto, energy, power) in BofA’s 2022 Task Force on Climate-related Financial Disclosures (TCFD) report and expanded upon in the 2023 TCFD Report.
As for its 2030 targets for its financing activity, the bank plans to reduce the emissions intensity of its auto, energy, and power portfolios. Specifically, as of 2022, its current targets include:
Specifically, its current targets include:
Auto manufacturing target
- 44% reduction in emissions intensity in Scopes 1-3 end-use activity
Energy target
- 42% reduction in emissions intensity in Scopes 1-2
- 29% reduction in emissions intensity in Scope 3 end-use activity
Power target
- 70% reduction in emissions intensity in Scope 1 activity
The bank has also pledged to invest $1 trillion in sustainability initiatives by 2030. In addition, BofA is a leading issuer of green bonds and was one of the first banks to begin phasing out coal in 2015. The bank is also a founding member of the Net Zero Banking Alliance (NZBA), which aims to support the transition to a low-carbon economy.
On another positive note, BofA has reduced its overall fossil fuel financing from slightly over $39 billion in 2016 to less than $35 billion in 2022, a greater decline in funding than its peers.
Four shortcomings in Bank of America’s approach to climate change
Despite its current commitments, BofA is still lacking in its efforts to combat climate change. Here are four points to consider in evaluating BofA’s climate pledges.
#1: Compared to absolute emissions targets, emissions intensity targets allow for continued funding of fossil fuel expansion
BofA’s 2030 targets address only emissions intensity, and not absolute emissions. Roughly speaking, emissions intensity is a calculated value that estimates the volume of emissions in a sector per dollar amount financed in that sector. It’s a relative measure. That means that financing can increase – and so can absolute emissions – so long as the relative amount of emissions per dollar stays within the target range (for more details, see our emissions explainer post here).
In practical terms, using an emissions intensity metric means that BofA can continue providing billions in funding to fossil fuel expanders and remain superficially consistent with its reduction targets.
It should also be noted that BofA’s targets differentiate between end-use (Scope 3) and operational (Scopes 1 and 2) emissions. While this increases the transparency of its reporting, it also “intentionally sidestep[s] the highest-emitting part of the oil and gas supply chain,” according to a recent report by the Sierra Club. That is, BofA does not include emissions associated with the combustion of fossil fuels in its near-term targets. In the US in 2020, the combustion of fossil fuels accounted for more than 72% of CO2e emissions, so this is a noteworthy omission.
#2: Revenue from coal has decreased in recent years, but coal policy is vague
Despite the early adoption of a coal mining exclusion policy, BofA now lags behind global peers in its coal policy. According to its 2022 Environmental and Social Risk Policy Framework, BofA has committed to phasing out financing for companies that earn 25% or more of their revenue from thermal coal mining by 2025 (although it will make an exception if the company is working to transition away from thermal coal). In the future, BofA will not directly fund new mines or the expansion of existing mines, nor will it fund new coal-fired power plants or the expansion of existing ones (unless they use technology such as carbon capture and sequestration to mitigate their impacts). BofA’s framework does not limit corporate financing to coal power companies.
The loopholes in BofA’s coal policy have enabled it to increase its funding in both the coal mining and coal power sectors over time. Between 2016 and 2022, BofA has provided $967 billion in funding to coal mining companies and $678 billion to coal power companies. For coal mining, funding each year has either maintained the same level or increased compared to 2016. Overall, BofA’s increased funding in both coal mining and coal power is a sign of a deficient coal policy and a lack of commitment to climate change mitigation.
Environmental groups are expressing concern regarding BofA’s recent update to its Environmental and Social Risk Policy (December 2023). The revised policy removes previous explicit prohibitions on financing activities like Arctic oil exploration and thermal coal mining. While BofA emphasizes "enhanced due diligence" for such projects, the lack of clear criteria raises questions about the bank's commitment to limiting its role in financing environmentally harmful activities.
#3: Far-reaching global involvement in fossil fuel expansion
BofA’s climate commitments do not prevent it from providing extensive funding to offshore drilling, coal power, and more across the globe. Here we list just a few of the projects and companies around the world that BofA’s funding has made possible.
Investing in the Americas
Two of BofA’s top fossil fuel clients are ExxonMobil and Occidental Petroleum Corp, both of which are notorious for oil and gas expansion in the US. Between 2016 and 2021, BofA provided over $15 billion in funding to ExxonMobil and over $12 billion to Occidental Petroleum, in addition to advising Occidental on its 2019 merger with Anadarko. ExxonMobil continues to develop new offshore drilling in Guyana, amongst other climate infractions.
In South America, BofA has provided $4.8 billion in funding to Petrobras, which is known for its leadership in ultra deepwater oil and gas extraction off the coast of Brazil.
Moving north, BofA has provided over $4.6 billion in funding to Canadian company Enbridge, responsible for the Line 3 replacement pipeline, which can transport around 760,000 barrels of oil per day over 1,000 miles through Canada into the US. The emissions associated with the expansion exceed the emissions of the entire state of Minnesota in 2016. Broadly speaking, the pipeline poses a threat to forests and wetlands in the Great Lakes region, infringes on the rights of indigenous peoples, and perpetuates tar sands expansion.
Investing in Europe and beyond
Across the Atlantic, BofA has made its mark in the UK and mainland Europe by funding BP to the tune of $5.9 billion and Norwegian company Equinor to the tune of $2.5 billion. Both companies are associated with continued oil and gas exploration. BP’s Clair Ridge project, which is located West of the Shetland Islands, has a planned extraction capacity of 640 million barrels of oil over the next 40 years. BP, along with Shell, Total, and Chevron, operate fields that account for about 40% of oil extraction in the region (BP is also involved in offshore drilling and underwater pipelines in Africa). Equinor continues fossil fuel expansion in the North Sea, having made a discovery in recent years. BofA can fund fossil fuel companies that are expanding operations in the Arctic – like Equinor – and remain consistent with its narrow Arctic exclusion policy, which does not limit corporate financing.
BofA distributes smaller but significant amounts to fossil fuel companies beyond the Americas and Europe. For example, BofA is the top US financier of China National Petrochemical Corporation ($133.3 million in 2020). It is also one of the top funders of fossil fuel expansion in Africa, having invested over $4 billion between January 2019 and July 2022.
#4: Shareholders demand better
A shareholder resolution at the 2022 proxy meeting filed by Trillium Asset Management requested that BofA cease funding fossil fuel expansion or at least propose an action plan by the end of 2022 to end such funding. BofA opposed the resolution claiming that it already has a framework in place for addressing environmental, social, and financial risks; it already has dedicated support to low-carbon energy sources; and it is already committed to net zero emissions by 2050.
As of 2023, Trillium Asset Management again proposed that BofA cease fossil fuel funding, and the bank again recommended that shareholders vote against the resolution.
The verdict: Smoke and mirrors from this climate delayer
Between potentially misleading emissions targets and greenwashing in its social media and promotional content, BofA gives the appearance of making greater progress toward combating climate change than it truly has.
Going into 2024, BofA's increased transparency regarding financed emissions is a welcome development, but it doesn't translate to a significant reduction in overall fossil fuel financing. Furthermore, recent updates to its policies on Arctic drilling and coal mining represent a step backward, offering little reassurance that the bank will significantly restrict fossil fuel financing in the future.
At present, the bank does not have a plan for reducing absolute emissions or phasing out fossil fuels.
If you have an account with BofA, it is important to voice your concerns about the bank's climate policies. BofA should immediately stop funding new fossil fuel projects and the companies that control them, in line with recommendations from the International Energy Agency (IEA). In the near term, the bank should set clear goals for absolute emissions reductions across its investment portfolio.
You can also prompt action by moving your money. Consider some of GreenPortfolio’s suggestions for alternative, climate-friendly banks.
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