After Pouring Over $1 Trillion Into Fossil Fuel Finance, CEOs of 6 US Banks Testify Before Congress

Despite talk of an energy transition and a wave of fossil fuel bankruptcies, big bank CEOs described plans to continue business with beleaguered fossil fuel industries.
JPMorgan CEO Jamie Dimon
Jaime Dimon, CEO of JPMorgan Chase, testified at the House Committee on Financial Services on May 27, 2021. Credit: Webcase of U.S. House Committee on Financial Services hearing, via YouTube

This week, the House and Senate called in the CEOs of six big banks for two wide-ranging hearings that lawmakers touted as efforts to hold “megabanks accountable,” the first time in roughly two years that the heads of major banks have collectively appeared before Congress.

Combined, the six CEOs lead organizations that have poured over $1 trillion in financing into the fossil fuel industry since the Paris Agreement was signed in 2015, based on the numbers tallied in a 2021 report from Rainforest Action Network and other environmental advocates.

JPMorgan Chase — whose CEO Jamie Dimon testified — helped finance $317 billion for fossil fuel expansion since the 2015 international climate accord, that report found. Citi — represented by CEO Jane Fraser — ranked second with $237 billion. 

Wells Fargo was third with $223 billion in financing for fossil fuels and Bank of America at $198 billion rounded out the top four. Morgan Stanley also ranked in the report’s “dirty dozen,” adding $111 billion in fossil fuel financing since Paris, while Goldman Sachs was number 15 on the list, adding $100 billion in financing and bringing the total to over $1.1 trillion. 

“JPMorgan Chase remains the world’s worst banker of fossil fuels over this time period, though its funding did drop significantly last year,” the “Banking on Climate Chaos” report noted. “This report also tracks funding for 100 top fossil fuel expansion companies and finds JPMorgan Chase, Citi, and Bank of America to be their biggest bankers over the last half decade, all with significant increases in funding last year despite voicing their support for the Paris Agreement.”

Under questioning about climate change from lawmakers on both sides of the aisle during the hearings, the bank CEOs promised big — if often vague — things on an energy transition in the U.S., while also telling Congress that they still believed, in the words of JPMorgan Chase CEO Dimon, that “abandoning fossil fuels is not an option right now.”

Several of the bank CEOs described “net zero” goals, for example, and most described growing efforts to move billions of dollars into low carbon or energy transition-linked projects. 

Those efforts — many very recently announced — could potentially mark the beginning of significant changes in the ways that big banks and other financial institutions address the climate crisis and begin funding an energy transition. But net zero targets have raised eyebrows in the past because often the devil is in the details. “Many net zero targets have three shortcomings: incomplete disclosure, confusing terminology, and problems with offsets,” Reuters explained this month.

JPMorgan Chase declined to participate in the Net Zero Banking Alliance that several other large banks have joined, instead framing its climate goals for 2030 in terms of “carbon intensity” reductions — another red flag, campaigners say.

“Carbon intensity is just a greenwashing term that’s totally compatible with increased emissions in absolute terms,” Jackie Fielder, a spokesperson for Stop the Money Pipeline, a coalition of 150-plus environmental groups, told DeSmog. “Using carbon intensity targets means JPMorgan is only taking a page from big oil’s playbook.”

Big banks have also faced public backlash over their continued roles in financing, for example, major oil and gas pipelines projects. Wells Fargo, for example, was met with protests this month spanning eight countries over the bank’s role in the Enbridge Line 3 pipeline.

“[F]ossil fuel producers, whose core business is pulling hydrocarbons out of the ground and burning them, don’t have a credible pathway to” the energy transition, Ben Cushing, director of the Sierra Club’s finance campaign told Scientific American earlier this year. “That’s the hard truth that a lot of financial institutions don’t want to admit out loud.”

Of course, breaking up with fossil fuels might also require taking an uncomfortable look at many banks’ own boards of directors. The banks represented at this week’s Congressional hearings have maintained deep ties to fossil fuel producers, as DeSmog reported in an April investigation that found 65 percent of directors from the world’s top banks have ties to polluting industries or their lobby groups.

At least one in five board members at Bank of America, Citi, Goldman Sachs, JPMorgan Chase, and Morgan Stanley have current or past connections to companies with the most significant climate impacts as identified by the investor-led Climate Action 100+ initiative, DeSmog has previously found. A full 100 percent of the directors of JPMorgan Chase, for example, had ties to polluting industries, including “multiple affiliations to companies funding or associated with hydrocarbon extraction,” DeSmog’s investigation found.

Bank CEOs “Vaguely” Aware of Environmental Racism

The two wide-ranging Congressional hearings touched on issues from overdraft fees to cryptocurrencies to the banks’ pandemic responses. Some of the hardest-hitting questions from lawmakers focused on racial justice — including the ways that racial justice and environmental justice intersect. 

During the May 27 House hearing, the CEOs of all six banks indicated they were unfamiliar with concepts used by environmental and racial justice advocates.

In one of the hearing’s most notable rounds of questioning, Representative Rashida Tlaib (D-MI) asked the CEOs a simple question. “I just want to ask one by one, yes or no, are you familiar with the term ‘environmental racism’?”

Not one of the six top executives responded that they were more than “vaguely” familiar with the term.

“You all should know and be familiar with the term environmental racism because for generations, Black, brown, and Indigenous communities have seen the fossil fuel corporations use your banks to finance and construct oil and gas refineries, petrochemical plants, and pipeline projects,” Tlaib said. “It has literally left us with high rates of asthma, cancer — countless families have lost their loved ones too soon because they were forced to breathe the polluted air your banks financed.”

“If you truly believe in racial justice, then you would make sure that you and your team understand environmental racism in our country,” she added. “That has been a term used by Black and brown communities since the 70s and 80s.”

Lenders Burnt — And Not Just by Climate

While members of the U.S. Senate Banking Committee confronted the CEOs of six major banks over climate change and other topics, a federal judge in West Texas was occupied, in part, with a routine administrative filing.

That same day, Judge Roland B. King signed off on an order confirming a Chapter 11 bankruptcy plan for a company called Finger Oil & Gas, Inc. The oil company reported plans to at least partially pay off its remaining debts, which added up to roughly $625,000 when it filed, using proceeds it expects not from the sale of oil and gas, but from an insurance claim linked to an accidental well blowout in 2019.

Finger was just one of 560 North American oil and gas companies that the law firm Haynes and Boone reports have declared Chapter 11 bankruptcy since 2015. That is an average of one oil company going bankrupt every four days for over a half decade. Many of those oil bankruptcies involved mountains of debt far larger than those confronting that tiny Texas drilling company. “During 2020 alone, more than $98 billion has been brought to court, compared with $70.3 billion during the previous oil bust” in 2016, the Houston Chronicle reported in January.

That kind of poor credit history is why it might have been so absurd to hear some of the softball questions posed to the six CEOs who lead JPMorgan, Citi, Wells Fargo, Bank of America, Morgan Stanley, and Goldman Sachs — banks that, combined, have arranged over $1 trillion in financing for fossil fuel companies since the Paris Agreement.

“Pennsylvania is now the second-largest producer of natural gas among all 50 states,” Pennsylvania Senator Pat Toomey, the top Republican on the panel, said as the hearing began. “And I have heard directly from constituents in this field that they’re finding it more difficult to finance their business as a result — they believe — of commitments that financial institutions have made to reduce greenhouse gas emissions.”

He proceeded to ask Citi CEO Jane Fraser if her bank planned to prohibit lending to natural gas companies “aside from if the economics would dictate that you shouldn’t provide the financing?”

“We don’t plan to have prohibition against this, no,” Fraser answered. “We plan to help our clients in the transition to the cleaner carbon technologies.”

It was a swing-and-a-miss for the senator, a question built on an assumption that, if big banks were wary of fossil fuel companies, that would be somehow irrational — or linked to climate policy alone. (Toomey, it should be noted, very recently argued that climate change just isn’t really a big deal, saying in a May 25 Senate Banking Committee hearing that “neither the warming of the earth’s temperature nor severe weather events are a threat to the stability of the financial system.” Peer-reviewed research has concluded the exact opposite.)

Questions in a similar vein continued throughout the Senate’s hearing on May 26 and into the House Financial Services Committee hearing the next day. “I would encourage all of you to prioritize credit risk as opposed to politics,” one GOP representative from Kentucky said as he discussed climate change and fossil fuel companies, drawing no dispute from the CEOs in attendance.

“Some bank lobbyists privately said they were pleased, commenting that there were no public relations missteps,” Bloomberg reported in its coverage of the Congressional hearings.

Despite all of that backing from banks and other financiers and after several years under the most ardently pro-fossil fuel administration in recent memory, oil companies entered the pandemic ill-equipped to handle the disruptions that ensued. 

Remarkably, as oil prices plummeted in April 2020, JPMorgan, Wells Fargo, Bank of America, and Citi were all forced to make emergency plans to own and manage oil and gas wells if drillers began collapsing, leaving lenders holding onto the physical assets that drillers had borrowed against. “The industry is estimated to owe more than $200 billion to lenders through loans backed by oil and gas reserves,” Reuters reported at the time.

Banks Talk Transition, Retain Ties to Fossil Fuel Firms

There’s no small amount of irony in large banks finding themselves somewhat insulated from criticism, at least from the political right, over their response to climate change, given the miserable financial performance of many fossil fuel companies in recent years.

The fact is that instead of being ahead of the curve, major banks — in part under the leadership of the same CEOs questioned by Congress — for decades failed to react in a timely way to growing concerns over both fossil fuel company management as well as to the climate crisis.

And to this day, large banks remain behind the curve — even when compared to other multinational organizations, which have begun to draw clear-cut lines on the future of fossil fuels. “No new oil and natural gas fields are needed” as the world moves to preserve an even chance of keeping climate change to the 1.5°C line recognized in the Paris Agreement, the International Energy Agency, an organization notoriously bullish on fossil fuels, recently noted in a landmark report. “The contraction of oil and natural gas production will have far-reaching implications for all the countries and companies that produce these fuels.”

Despite warnings from numerous financial analysts as well as the continued unchecked acceleration towards catastrophic climate change, many other major banks worldwide have also poured huge sums into various kinds of fossil fuel finance in recent years. “In the 5 years since the Paris Agreement, the world’s 60 biggest banks have financed fossil fuels to the tune of $3.8 trillion,” the Banking on Climate Chaos report noted.

Some of the most consequential battles for energy finance are just getting underway. “There’s a real need for standardized ways to measure emissions for everyone, as far as corporations and banks,” Fielder told DeSmog, “and that’s why we want to support climate risk disclosures at the SEC [Securities and Exchange Commission].”

Public comments on the SEC’s disclosure deliberations are due by June 13. 

Following the May 26 hearing, Senate Banking Committee Chairman Sherrod Brown (D-OH) slammed big banks for continuing to move slowly on the climate crisis. 

“They can’t say climate change is a threat to the entire economy, while dragging their feet when it comes to investing in new technology and the jobs of the future,” Brown said in a statement. “These CEOs have a lot of work to do.”  

Clarification 06/15/2021: A previous version of this article stated that Wells Fargo was not analyzed in DeSmog’s prior reporting on climate-conflicted bank directors. The bank was included in DeSmog’s analysis.

Sharon Kelly is an attorney and freelance writer based in Philadelphia. She has reported for The New York Times, The Guardian, The Nation, National Wildlife, Earth Island Journal, and a variety of other publications. Prior to beginning freelance writing, she worked as a law clerk for the ACLU of Delaware.

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