Dive Brief:
- Citi became the latest U.S. bank to agree to disclose its clean energy financing ratios last week, prompted by a shareholder resolution filed by the New York City Comptroller’s Office, the New York City Employees’ Retirement Systems and Teachers’ Retirement Systems in January.
- The decision comes shortly after JPMorgan Chase announced this month it would disclose its financing ratio of low-carbon energy supply to fossil fuel energy supply. JPMorgan had requested a no-action letter from the Securities and Exchange Commission, but withdrew the request once the proposal — which the Board of Education Retirement Systems joined in filing — had also been withdrawn.
- A spokesperson for New York City Comptroller Brad Lander confirmed to ESG Dive Monday that an agreement was reached with Citi, and the proposal was withdrawn. Lander and the retirement systems are expected to face votes on the proposal, which remain filed at Bank of America, Goldman Sachs, Morgan Stanley and Royal Bank of Canada.
Dive Insight:
The shareholder proposals asked the banks to set targets related to their clean energy financing ratios — as well as defining “low carbon” and “fossil fuels” — and regularly update and report transparently on their progress. The proposals also asked the banks’ boards to set targets for their clean energy financing ratios that align with their net-zero commitments; work on standardizing industry methodologies; and disclose comparable lending ratios.
According to Lander’s office, the three pension systems, being long-term shareholders in the banks, are “concerned with the consistent funding of fossil fuel projects and lack of transparency” on how the financial institutions are progressing against their own goals and commitments.
Citi has previously set goals of reaching net-zero emissions by 2050 and investing $1 trillion in sustainable finance by 2030. Lander and the New York City pension systems said in their proposal that while that “may appear significant, investors need more information to assess it relative to Citigroup’s financing of fossil fuels.” JPMorgan had previously set a goal of spending $1 trillion on green initiatives by decade’s end.
However, both of these goals were contrasted with data from an annual report conducted by a coalition of environmental groups that tallied the banking industry’s financing of fossil fuels. The 14th annual Banking on Climate Chaos report found that JPMorgan and Citi are the top two fossil fuel financiers since 2016, spending $434.15 billion and $332.91 billion, respectively across all sectors.
Citi declined to comment for this story.
Environmental group Sierra Club, one of the organizations who compiled the annual report, said last week that the announcements from Citi and JPMorgan are welcomed, given their spots on that list.
“All eyes are on the remaining Wall Street banks to also commit to disclosing this important baseline information, and then take the necessary steps to rapidly scale up clean energy financing and reduce fossil fuel financing to align with their climate goals,” Ben Cushing, director of Sierra Club’s Fossil-Free Finance campaign, said in a release Thursday.
While agreements were reached with JPMorgan and Citi, the boards for Bank of America, Goldman Sachs and Royal Bank of Canada have recommended that shareholders vote against the proposal in their respective annual shareholder meetings. Morgan Stanley has yet to publish the shareholder materials for its annual board meeting.
Bank of America recommended voting down the measure, noting third parties have developed and publicly disclosed such information for global banks already. The bank also said it is assisting clients in their transition to net-zero through client engagement and developing and investing in climate products and services, according to its proxy vote materials. Additionally, the board said Bank of America is “transparent about actions to set targets for financed emissions” to reach its goal of net-zero by 2050.
While Goldman Sachs’ board “unanimously” recommended its shareholders vote against the resolution, the firm said it already plans to publish a green asset ratio beginning later this year to comply with required disclosures by the European Banking Authority.
Royal Bank of Canada’s board said in its proxy materials that it believes that collectively — through its client engagement approach, climate report, sustainable finance framework, disclosure of renewables lending and disclosure of its absolute financed emissions for oil and gas — its disclosures “provide sufficient transparency on our approach and strategy.”
“Given the lack of industry standards around the clean energy supply financing ratio, we believe that disclosing this metric is premature and would not provide meaningful additional insights to our stakeholders,” the Canadian bank’s board said.
