How shareholders are pushing big banks for climate action

It is difficult to live without banks. But having an account often ties our money to the conveyor belt of global finance and its effects on the climate.

Take Citigroup, which owns Citibank, for example. Market research firm YouGov ranks Citibank Among the most popular banks in the United States. It’s also the world’s second-largest fossil fuel financier, according to one study. Rainforest Action Network’s latest reportan environmental group.

Earlier last year, Citigroup, like many other financial institutions, made a commitment to stop adding greenhouse gases to the atmosphere and become carbon neutral by 2050. But when a small group of shareholders submitted a proposal that pressured the bank to stop financing new fossil fuel projects this year, the board was thwarted.

The proposal was voted down at Citigroup’s annual shareholder meeting a few days ago, just as similar efforts have been made at other banks over the past few weeks. Bank of America, Credit Suisse and Royal Bank of Canada was among them. Shareholders at Morgan Stanley and JPMorgan Chase are expected to vote on similar proposals soon.

we talked about the topic last week Increasing pressure on Big Oil changing the global energy business. This is an example of what this edition looks like.

Banks play a critical role not only in financing fossil fuel projects, but also in facilitating the transfer of fossil fuel assets between companies. As my colleague Hiroko Tabuchi wrote on Tuesday, some of these processes include: big oil companies offload their dirtiest operations to achieve climate goals. But these operations are often taken over and accelerated by lesser-known companies with no climate policy.

Recent shareholder proposals argued that banks can only become carbon neutral if they stop funding new oil and gas fields, but within their own set deadlines. based on this an assessment It was said last year by the International Energy Agency that if the world neutralized emissions by 2050, there was no room for new fossil fuel developments.

These distant dates sometimes do not feel urgent. But at Citigroup meeting this year The discussion became personal when investor John Harrington, who offered to cut funding immediately, got a chance to speak.

He told his partners how a forest fire burned his 30-year-old home in Napa Valley. He said he had arrived without warning, and he and his wife barely survived “through fire and smoke” until they reached safety.

“This story has been repeated in many parts of the world,” said Harrington. “This is our future thanks to climate change and our banks continuing to finance fossil fuels.”

A few questions about the offer came before Citigroup CEO Jane Fraser responded. She said the company agrees that emissions need to be reduced and that the war in Ukraine highlights the need for a faster transition to renewable energy.

“However,” he added, “it is not possible to shut down the fossil fuel economy for the global economy, human health or livelihood overnight.”

Lauren Compere, chief executive of Boston Common Asset Management, which is working on the shareholder offer to Citigroup, said she expects many more of these resolutions to be presented in the future.

He said investor expectations are rising for a clear understanding of what climate risks are and how companies manage them. “This is not going to go away,” Compere said.

Shareholder resolutions generally do not need majority support to become law. The result of more than 30 percent support for a proposal can help bring company management to the negotiating table. And while shareholders do not have policy-making power, they can elect the members of the board of directors who run the company.

In 2020, for example, nearly half of JPMorgan’s shareholders voted for the bank to explain how it intends to align its lending practices with the Paris Agreement. The following year, the bank made a similar commitment.

The fossil fuel proposal at Citigroup was as follows: approved by only 11 percent of voters. Still, major shareholders such as the New York and Texas state pension funds, which manage hundreds of billions of dollars, supported it.

Activist shareholders say they will need the support of big asset managers like BlackRock and Vanguard to pass these decisions, which they don’t have this time.

However, most of the proposals received more than the 5 percent support that needed to be resubmitted. They probably will.

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Before you go: Does ‘sustainable fashion’ mean anything?

How can a company that builds its business model on overconsumption become sustainable? The Times’ chief fashion critic Vanessa Friedman doesn’t get it either. Perhaps, as he wrote, sustainability, which implies the ability to “continue over a period of time,” just doesn’t fit in the ever-changing fashion world. He proposes a reframing: “responsible fashion”. This means brands and manufacturers taking responsibility for the impact of their choices.

Thank you for reading. We’ll be back on Friday.

Claire O’Neill and Douglas Alteen contributed to Climate Forward.

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