Wall Street CEOs are green. JPMorgan Chase today reached a deal with three New York pension funds for a $478 million investment in the bank to reveal its clean energy mix to fossil fuel financing. The New York funds say the metric will give investors a better picture of how the bank is progressing toward its net-zero emissions goals and whether it is strengthening its clean energy financing efforts over time.
JPMorgan’s settlement with three New York-based funds that manage $193 billion in assets will result in the withdrawal of a shareholder proposal it made to six major banks. This makes JPMorgan the first of these banks to reach a deal with investors. The others—Bank of America, Citigroup, Goldman Sachs, Morgan Stanley and Royal Bank of Canada—still have proposals under consideration and the New York Comptroller’s office is cooperating with them. Pension funds in January announced that they have launched a campaign to encourage banks to provide more data on their climate transition commitments.
Bloomberg New Energy Finance research found that in order to keep average global temperature increases below the 1.5 degrees Celsius optimum, the ratio of low-carbon energy investment to fossil fuels must reach a minimum of 4 to 1 by 2030. will increase to 6 to 10 in the next decade and to 10 to 1 thereafter. In 2021, a Bloomberg study found that for every dollar spent supporting fossil fuels, 0.8 was spent on low-carbon energy. According to JPMorgan estimates, the ratio was 0.7.
A JPMorgan spokesman said it will take time to figure out how best to disclose the metrics investors are asking for.
“We reached common ground with the New York City Comptroller on the Clean Energy Funding Ratio disclosure, recognizing that we will need some time and resources to develop a useful decision-making approach,” the spokesperson said in a statement to Luck. “We will work with New York and our shareholders to provide the market with more clarity and transparency about our operations and what financing the transition actually looks like.”
In 2021, the bank announced a $1 trillion target to fund initiatives that advance the transition to a low-carbon economy. However, the funds specified in their proposal that JPMorgan is offering more fossil fuel financing than other banks, disbursing $434 billion since 2016 despite a commitment to reach net-zero emissions by 2050, the New York funds said.
The move comes just weeks after JP Morgan Asset Management and State Street came under fire for quitting Climate Action 100+, a coalition of investors focused on working together on companies that are also the biggest emitters of greenhouse gases. Pacific Investment Management Company (Pimco) has since announced it is leaving the group, bringing the total assets under management that have left to $19 trillion. (BlackRock transferred its participation in C100+ to BlackRock International.)
The asset management firms pointed to their independence in leaving the C100+, noting that the group had previously been focused on advocating for clearer disclosure rather than taking specific action. This strategy is set to change with the second phase strategy this year. It also coincides with a move toward anti-ESG proposals and rhetoric that has prompted conservative groups and politicians to criticize financial services companies for catering to “wokeness” at the expense of financial profits.
This was announced by a representative of Climate Action. Luck that antitrust laws are not intended to prevent investors or companies from working together on goals determined to be non-anticompetitive “that each of them has independently determined is in their best interest.”
The group cited analysis from the Columbia Center for Sustainable Investment, which found that antitrust laws have a chilling effect on “necessary private sector action to address climate and other sustainability challenges.”
Wall Street Journal reported this week that BlackRock has abandoned the term “ESG” in its public statements and that CEO Larry Fink no longer uses it in his annual letters. Instead, “transition investing” is a new workaround for ESG conversations. Magazine reported.
However, no matter what words companies use to discuss the issue, investors – particularly pension funds – remain focused on the risks of climate change and engaging with companies on their net zero commitments. A record 643 shareholder proposals related to environmental or social issues were submitted to public companies in 2023, according to a report from investor advisory firm Institutional Shareholder Services. This is expected to be a high point that is expected to continue into 2024.
Climate change-related issues are expected to generate the most shareholder proposals to companies, an ISS report says, and some investors are asking financial services firms to report any discrepancies between clients’ greenhouse gas emissions and net-zero emissions targets by 2030