No, I'm not suggesting another bank-induced financial meltdown like the one of 2008, but rather a direct analogy, where the behavior of the four or five largest US banks and their Wall Street allies first profit on a scheme that leads to untold pain and suffering for millions of ordinary people, and then reap further financial rewards for their bad behavior. I'll start out by pointing those of you who are too young to remember or have forgotten to two highly entertaining accounts: The Big Short, a book by Michael Lewis, and the motion picture of the same title, the trailer for which appears above. Spoiler alert: You will meet Michael Burry, one of the heroes, again in a future post.
The biggest US Banks (JP Morgan Chase, Citibank, Wells Fargo, Bank of America) are and have been the world's largest funders of fossil fuel exploration and extraction for at least a decade, and have lent out trillions (Trillions, with a “T”) of dollars. According to The Guardian (issue of 24 Mar 2021) they along with TD Bank lent out over $1.1 Trillion over the five year period 2016-2020 alone. And that is just the tip of the iceberg: According to an article in Forbes [1] the worldwide financial industry has lent fossil fuel companies $6.9 Trillion.
The year 2021 marked the COP26 conference, the keystone accomplishment of which was the establishment of the Glasgow Financial Alliance for Net Zero (GFANZ), an agreement by over 500 financial institutions having over $130 Trillion on their balance sheets to work toward net zero carbon emissions by 2050. Key US financial institutions signing on to voluntary participation included JP Morgan Chase, Citi, Wells Fargo, Bank of America, Goldman Sachs, and Morgan Stanley [2]. Citi and BlackRock executives numbered among the principals even though BlackRock itself, though one of the world's three largest asset managers at the time, made no pledges.
Even in November 2021 I was suspicious that some of the financial institutions viewed the GFANZ as an opportunity for greenwashing. Thanks to the Wayback Machine [3] I have been able to confirm the suspicion. For instance, Citi's 2022 report showed a $7 Billion investment in renewable energy in 2020 as compared to an investment of around $100 Billion in fossil fuels per the graphic at the top of this post. Another example is found in the Morgan Stanley report for 2022, where they assign an investment target of $1 Trillion thru 2030, but claim to have already invested $700 Billion+ to date. Of the larger sum, 15% is allocated to six areas, specifically clean energy, clean mobility, energy & operational efficiency, carbon reduction & removal, climate adaptation, and other environmental solutions. While the focus of the GFANZ is ostensibly on net zero emissions, many of the financial institutions lumped other virtuous but unrelated investments such as low income housing, climate adaptation, diversity & equity, education and health care – a partial listing. It is impossible to determine from the reports whether any of the US financial institutions have funded their net zero commitments by reducing their climate damaging investments, or even to compare the two.
The continued support for fossil fuel exploration and extraction by the big banks led to concerted efforts by climate justice groups to bring this travesty to the public's attention during the early 2020s, with the focus initially on JP Morgan Chase, then later on Citi as they overtook Chase as the world's current (though perhaps not cumulative) foremost climate criminal. Especially notable was the effort in 2024 by a coalition of climate justice groups to engage with Citi executives and to persuade Costco to drop Citi as the provider of their Visa card. None of these efforts was successful, and in New York, Citi used its political connections to affect police repression of the demonstrators.
Starting in 2021, the University of Hamburg's Cluster of Excellence CLlmate, Climate Change and Society (CLICCS) [4] has published their Climate Futures Outlook, which seeks to assess which climate futures are plausible, taking an interdisciplinary approach. In their 2023 assessment, they examined the plausibility of attaining the Paris Agreement temperature goals, and found that two social drivers: corporate responses and consumption patterns, “continue to undermine the pathways to decarbonization, let alone deep decarbonization” [5]. The 2024 assessment focused on the conditions under which sustainable climate change adaptation is plausible. The first of the key findings was “Reaching net-zero CO2 emissions by 2050 is currently not plausible. Especially corporate responses, consumption trends, and the lack of effective fossil-fuel divestment inhibit deep decarbonization.” (Emphasis theirs.) [6] This places the blame squarely on the financial community and consumers.
After the 2024 US election, the US financial community led the walk back of even the pretense of acting to support decarbonization by formally withdrawing from the GFANZ, leading to its near collapse [7]. Especially considering the support of the fascist candidate by many financial community executives, most notably Jamie Dimon, CEO of JP Morgan Chase, it is tempting to attribute this action to obedience in advance [8]. However, for reasons to follow, I think it was inevitable.
Given the consistency of their actions against the interests of a healthy planet, one might be tempted to think that the leaders of these financial community are anti-scientific, climate change deniers. Well, one would be wrong. According to an article published in the online edition of Scientific American [9], Morgan Stanley, JP Morgan and an international banking group have quietly concluded that climate change will likely exceed the 2°C Paris Accord limit. The article quotes a Morgan Stanley report stating “We now expect a 3°C world”. JP Morgan has been assuming global warming in the range 2.7 - 3.0+ °C since 2022. What this points to is a deliberate plan to not support combating climate change by disincentivising investments in clean energy, clean technology, sustainable agriculture and land use policy while promoting investments in areas that are harmful to the climate. The 2.7 - 3°C might ring a bell for you if you read my recent post on the UN Emissions Gap Report [10]. There, the UN report is quoted as stating that 2.6°C global heating is the best we could expect from a business as usual scenario. In other words, the financial community plan is to do even worse than business as usual.
Thus the connection between the financial community of today and that in the 2008 era. They knowingly do damage, and in doing so set themselves up to profit from the consequential economic chaos. Like the fossil fuel industry they underwrite, they know that what they are doing is wrong, and will cause irreparable damage to the planetary ecosystem. But worse, they are planning on it, so that they can make even more money once the fossil fuel reserves are insufficient to power the needs of what is left of us. What can we do about it? Here's a hint:
Oh, and as for the GFANZ, they have restructured, and even still have a couple of the greenwashers on their Principals Group. [11] It is difficult to take them seriously given that around 400 of the fewer than 600 financial institutions are planning on business as usual.
Notes
[1] https://www.forbes.com/sites/feliciajackson/2024/05/13/banks-back-fossil-fuels-with-71-trillion/
[2] GFANZ, The Glasgow Financial Alliance for Net Zero: Our progress and plan towards a net-zero global economy, November 2021, pp.100-101. Obtainable via the link https://www.gfanzero.com/
[3] The set of pledges is no longer to be found on the GFANZ web site, but much of the information for 2021-2023 can be obtained from the Wayback Machine: https://web.archive.org/ The material quoted in the paragraph was obtained from links within https://web.archive.org/web/20241009081703/https://www.unepfi.org/net-zero-banking/members/. I would be happy to provide those links to any paid subscriber requesting them.
[4] https://www.cliccs.uni-hamburg.de/
[5] Engels, Anita, et al. (eds.); 2023. Hamburg Climate Futures Outlook 2023. The plausibility of a 1.5°C limit to global warming—Social drivers and physical processes. Cluster of Excellence Climate, Climatic Change, and Society (CLICCS). Hamburg, Germany. p. 4. https://doi.org/10.25592/uhhfdm.11230
[6] https://www.cliccs.uni-hamburg.de/publications/hamburg-climate-futures-outlook.html
[7] https://www.ft.com/content/82c193c9-a52d-41fa-a945-e912737541b0
[8] Snyder, Timothy, On Tyranny, Twenty Lessons from the Twentieth Century, Ten Speed Press, 2021, p. 8
[9] Hiar, C. And E&E News, Big Banks Quietly Prepare for Catastrophic Warming, Scientific American, March 31,2024 https://www.scientificamerican.com/article/big-banks-quietly-prepare-for-catastrophic-climate-change/?
[10] https://stephenschiff.substack.com/p/egr-cop-and-all-that
[11] https://www.climateaction.org/news/glasgow-financial-alliance-for-net-zero-announces-restructure