Dive Brief:
- JPMorgan Chase spent $1.29 supporting solutions that contribute to green energy solutions for every dollar it spent financing high-carbon intensive or unabated fossil fuel supply in 2023, the bank shared earlier this month.
- The calculation includes its lending, facilitation and tax oriented financing for zero- and low carbon power generation, low-carbon fuels and other solutions, compared to its financing for things including oil and gas refining and coal, oil and natural gas power, according to a methodology released Thursday, the same day the bank released its annual climate report.
- Separately, the Nov. 14 climate report also revealed that there was a year-over-year decrease in the revenue-based carbon intensity for the bank’s real estate portfolio — JPMorgan’s third largest sector by wholesale credit exposure. The bank also reported increases in carbon intensity-based credit exposure for the transportation, automotive and technology, media and telecommunications sectors.
Dive Insight:
The green financing ratio disclosure was prompted by a shareholder proposal New York City Comptroller Brad Lander submitted to the bank. This proposal was also submitted to four other major U.S. banks and the Royal Bank of Canada, in the spring. JPMorgan was the first to agree to publish the ratio, a decision that followed “extensive engagement” with shareholders, the bank’s CEO Jamie Dimon said in the climate report. Lander subsequently withdrew his proposal.
The scope of low carbon activities also includes any financing for electricity networks, energy storage and carbon capture, utilization and storage. High-carbon activities take into account upstream, midstream and refining of oil and gas — including integrated oil and gas companies — and coal mining and transportation. The bank said its boundaries are consistent with the International Energy Agency’s World Energy Investment Analysis.
“We developed a data-driven and investment-focused methodology for calculating this ratio, to provide a forward-looking view on how our energy financing supports real economy investments in energy supply,” Dimon said in the bank’s climate report.
JPMorgan classified any project financing as either 100% low carbon or 100% high-carbon, and also included any tax-oriented investments, green bonds or green loans as low-carbon financing, according to its methodology. Dimon called the energy transition “an enormous commercial opportunity.”
However, in a research analysis published by JPMorgan earlier this year, the bank warned that a “reality check” was needed on the timeline for a global energy transition, noting that the shift from fossil fuels to renewable energy takes time. JPMorgan called the energy transition a “highly complex process,” noting it “should be measured in decades or generations, not years.” In line with this report, the International Monetary Fund has estimated that reaching net-zero will require $5 trillion in annual investments in low carbon solutions by 2030.
JPMorgan has a goal to finance and facilitate more than $2.5 trillion for long term climate change and sustainability solutions, as well as a goal to facilitate $1 trillion for green technology and power generation and resource management. The bank reported financing $66 billion towards the $1 trillion goal in 2023 and $194 billion towards the $2.5 trillion goal, according to the bank’s website.
The decrease in real estate carbon intensity included falls in revenue-based intensities for JPMorgan’s office, lodging and services and non-income producing real estate portfolios. The sector — to which the bank has more than $208 billion in total credit exposure — represents low physical risk for the bank due to climate change.
The bank noted, however, that the “cumulative effect of physical climate risk” could impact its residential real estate portfolio through greater physical damages, higher insurance premiums, reduced availability for insurance coverage, and the potential for adverse impacts on housing prices. Additionally, technology now represents a “moderate” physical risk for the bank, after being classified as a low risk in the bank’s 2023 climate report.
Following Lander’s proposal submissions to major banks in the spring, Citibank and RBC later followed suit and agreed to disclose their green financing ratios. Lander’s proposal went to a vote at Bank of America, Goldman Sachs and Morgan Stanley, failing to top 30% shareholder approval at each. However, Goldman Sachs said it plans to publish a similar ratio to comply with European Banking Authority requirements.
Clarification: This story was updated to reflect JPMorgan's portfolio carbon-intensity metrics refer to wholesale credit exposure.
