Wall Street‘s support for an aggressive transition to green energy is showing its limits as some of the largest firms face pressure to ease off their voluntary green financing commitments or weigh walking back on climate pledges altogether.
Political leaders campaigning for a rapid phaseout of fossil fuels have sought to facilitate tens of trillions of dollars in private-sector investment for renewable energy and other green technologies in pursuit of net-zero emissions by 2050. Big finance companies — JPMorgan Chase, Bank of America, investment giant BlackRock, and many others — have set their own companywide net-zero targets. But with the global energy crisis keeping the price of oil, coal, and gas elevated, they’re also stressing the need to keep investing in fossil fuels and reportedly may walk away from certain commitments to go green fast out of worry that it could expose them to legal liability if they fall short.
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BlackRock, which has committed to “supporting the goal of net zero greenhouse gas emissions by 2050 or sooner,” has been defending itself from Republican officials at the state and federal level who’ve criticized the fund manager for its embrace of green investment strategies that, in principle, disfavor traditional energy sources. Some states have even cut off business ties with the firm over the matter.
To defend itself, BlackRock has been holding up its investments in energy companies, including oil and gas ventures. The firm recently launched a webpage challenging Republican charges that it is boycotting fossil fuel companies that says it has invested $170 billion in American energy companies on behalf of clients, “including pipelines and power generation facilities.”
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“BlackRock even goes so far as to tout its continued investment in fossil fuels — without specific net zero targets or commitments or any plan for a phased transition away from the very investments that increase carbon emissions — as somehow a necessary part of a transition to a green economy,” Lander said in a September letter to BlackRock CEO Larry Fink.
JPMorgan Chase also intends to “[encourage] actions that set a path for achieving net-zero emissions by 2050,” the company has said.
Meanwhile, Chairman and CEO Jamie Dimon has said the world “is not producing enough oil and gas to reduce coal” and “make the transition [to green energy]” in a recent interview with CNBC.
Imposing a policy against financing new oil and gas projects would be the “road to hell for America,” Dimon has also said.
Dimon’s comments and other justifications for oil and gas investments by finance executives are “not at all aligned” with commitments JPMorgan Chase and others have made around net zero by 2050, said Adele Shraiman, campaign representative for Fossil Free Finance at Sierra Club.
Some of the biggest financial firms are reportedly considering pulling out of a voluntary coalition of financiers pledging to transition the emissions of their financed portfolios to net zero by 2050.
Multiple reports indicate that JPMorgan Chase, Bank of America, and Morgan Stanley are considering leaving the Glasgow Financial Alliance for Net Zero, or GFANZ. They fear their involvement with GFANZ, which commits participants to rigorous U.N.-developed criteria by which they must reduce greenhouse gas footprints of their portfolios, exposes them to legal liability if they are deemed to fall short, according to Bloomberg and the Financial Times.
“I am close to taking us out of these global green commitments — I’m not going to allow third parties to create legal liabilities for us and our shareholders. It is immoral and irresponsible,” a senior executive told the Financial Times. “What if we get it wrong, make a mistake or someone lies? Then the bank can be sued, that is an unacceptable risk.”
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Since the war in Ukraine and ensuing energy crisis began, the Biden administration and European countries have also been compromising on the green energy transition they’d hoped to oversee.
President Joe Biden has endorsed more oil and gas production, and the European Commission has committed to new investments in oil and gas infrastructure, to help reduce the Europeans’ reliance on Russia for energy.
