If the financial services industry was a nation, it would rank as the world’s fifth-largest emitter of greenhouse gases.
A study authored by the Sierra Club and the Center for American Progress shows that eight of the biggest US banks and 10 of its largest asset managers combined to finance an estimated 2 billion tonnes of carbon dioxide emissions, based on year-end disclosures from last year, or about 1 percent less than Russia produced.
The emissions are equal to 432 million passenger vehicles driven for one year — and the number would have been considerably higher if scope 3 data and other factors were included. (Scope 3 represents the emissions produced by a company’s supply chain and customers.)
Illustration: Lance Liu
What are the financial consequences of such atmospheric destruction?
The report’s authors are urging the US government to take immediate steps to slash the financial sector’s role in climate change, lest it trigger a financial crisis that dwarfs that of 2008.
Unless the White House manages the transition away from a fossil fuels in an orderly way, the consequences would spread across the financial system and lead to “dire impacts for the entire US economy,” the report says.
The report notes that insurer Swiss Re in May wrote that the global economy risks losing more than 18 percent of GDP by 2048 if no action on the climate crisis is taken. For perspective, the US economy contracted by about 4.3 percent during the Great Recession.
Just like 2008, the people who would be most damaged by a climate crisis-induced crash are those who did the least to cause it — ethnic minority communities and low-income earners, the researchers said.
“Wall Street’s toxic fossil fuel investments threaten the future of our planet and the stability of our financial system, and put all of us, especially our most vulnerable communities, at risk,” said Ben Cushing, manager of the Sierra Club’s Fossil-Free Finance campaign. “Regulators can no longer ignore Wall Street’s staggering contribution to the climate crisis.”
US President Joe Biden last week signed an executive order directing the government to dramatically shrink its carbon footprint, with a goal of reaching net-zero greenhouse gas emissions across all of its operations by 2050.
Biden is calling for US agencies to spend billions of dollars on electric vehicles, clean power and upgraded buildings to reach the target.
According to authors of the new report, Wall Street’s Carbon Bubble, Biden has to go after banks and investment firms, too.
“Disclosure is an essential and foundational step in mitigating market risk,” the 24-page report says. “However, disclosure alone isn’t enough and must be paired with prudential regulation.”
To mitigate climate-related financial risks posed by Wall Street’s exposure to high carbon-emitting industries, the report states that regulators, including the US Securities and Exchange Commission and the US Department of Labor, should at least take the following steps:
Require all financial institutions disclose all emissions embedded in their portfolios and attributable to businesses for whom they provide services.
Ensure that investment fiduciaries keep their commitments to clients and the public, including those related to how they invest and vote their shares.
Incorporate climate risk into the supervisory ratings they assign to banks.
Administer climate-related stress tests to identify the banks’ potential losses from climate change (Moody’s Investors Service estimates that banks globally have US$22 trillion of exposure to carbon-intensive industries).
Require that banks fund riskier investments with more equity capital and less debt.
Implement climate-risk surcharges on “global systemically important banks.”
Adjust deposit insurance premiums to reflect climate-related risks.
Proactively address racial and economic justice issues that intersect with such climate-risk related reforms.
Who is behind all that carbon dioxide and perhaps the next financial crisis?
JPMorgan Chase & Co, Citigroup Inc, Wells Fargo & Co and Bank of America Corp have been the largest providers of funding to the fossil-fuel industry. Together, the eight banks in the report financed an estimated 668 million tonnes of carbon dioxide equivalent (equal to 145 million passenger vehicles driven for one year) through the US$5.3 trillion of credit exposure assessed by the researchers.
The 10 asset managers’ activities led to 1.3 billion tonnes of carbon dioxide-equivalent, or 287 million passenger vehicles.
Continued unfettered emissions supported by the financial industry mean deadly wildfires, droughts, heat waves, hurricanes, floods and other extreme weather events would only become worse, and “efforts to mitigate emissions will only become more challenging and costly,” the report says.
Ironically, the financial sector is just as much at risk from the very emissions that it is funding, since the ripple effects of a warming planet could lead to catastrophic losses for global capital markets.
“If left unaddressed, climate change could lead to a financial crisis larger than any in living memory,” Andres Vinelli, vice president of economic policy at the Center for American Progress, wrote in the report.
In the first year of his second term, US President Donald Trump continued to shake the foundations of the liberal international order to realize his “America first” policy. However, amid an atmosphere of uncertainty and unpredictability, the Trump administration brought some clarity to its policy toward Taiwan. As expected, bilateral trade emerged as a major priority for the new Trump administration. To secure a favorable trade deal with Taiwan, it adopted a two-pronged strategy: First, Trump accused Taiwan of “stealing” chip business from the US, indicating that if Taipei did not address Washington’s concerns in this strategic sector, it could revisit its Taiwan
The stocks of rare earth companies soared on Monday following news that the Trump administration had taken a 10 percent stake in Oklahoma mining and magnet company USA Rare Earth Inc. Such is the visible benefit enjoyed by the growing number of firms that count Uncle Sam as a shareholder. Yet recent events surrounding perhaps what is the most well-known state-picked champion, Intel Corp, exposed a major unseen cost of the federal government’s unprecedented intervention in private business: the distortion of capital markets that have underpinned US growth and innovation since its founding. Prior to Intel’s Jan. 22 call with analysts
The Chinese Communist Party (CCP) challenges and ignores the international rules-based order by violating Taiwanese airspace using a high-flying drone: This incident is a multi-layered challenge, including a lawfare challenge against the First Island Chain, the US, and the world. The People’s Liberation Army (PLA) defines lawfare as “controlling the enemy through the law or using the law to constrain the enemy.” Chen Yu-cheng (陳育正), an associate professor at the Graduate Institute of China Military Affairs Studies, at Taiwan’s Fu Hsing Kang College (National Defense University), argues the PLA uses lawfare to create a precedent and a new de facto legal
International debate on Taiwan is obsessed with “invasion countdowns,” framing the cross-strait crisis as a matter of military timetables and political opportunity. However, the seismic political tremors surrounding Central Military Commission (CMC) vice chairman Zhang Youxia (張又俠) suggested that Washington and Taipei are watching the wrong clock. Beijing is constrained not by a lack of capability, but by an acute fear of regime-threatening military failure. The reported sidelining of Zhang — a combat veteran in a largely unbloodied force and long-time loyalist of Chinese President Xi Jinping (習近平) — followed a year of purges within the Chinese People’s Liberation Army (PLA)
RSS