JP Morgan has pledged to facilitate US$200bn in clean financing by 2025, which it says is the “largest commitment by a global financial institution” to date – a move that comes just one month after a report revealed that the bank had increased its lending to destructive sectors.
The new sustainable financing target covers JP Morgan’s projects from the beginning of 2016 and over a 10-year period. While the bank didn’t have a specific goal before, it says the new objective will increase the lending from the around US$16bn it has facilitated to clean projects yearly over the past three years, to the new average of US$20bn a year.
With the announcement, JP Morgan enters a tight sustainability race with a number of other global banks that over the past two years have been overbidding each other on their 2025 targets. This includes Citi, which in 2015 committed to lend, invest and facilitate a total of US$100bn for sustainable growth over 10 years. It was followed by Bank of America, which promised US$125bn, and Goldman Sachs, which took the target to US$150bn. Although JP Morgan is a bit late to jump on the bandwagon, it is certainly attempting to make up for it with an even more significant number on the table.
Speaking to GTR, Erin Robert, head of capital strategies in JP Morgan’s sustainable finance department, says the new goal represents a “ground-up initiative” from across the bank, which has received high senior attention and support.
“It’s more than anything trying to provide a categorical view of what the firm is already doing,” she says. “From our standpoint, the goal really helps provide an organising framework for various sides of the business, who are already hard at work in these areas, and go to market in a more co-ordinated way.”
“Clean financing” in this respect includes support for client projects and companies that are involved in new energy, transportation, waste management, water treatment and technology innovations.
Specific actions to meet the US$200bn target involve advising clients in the renewables sector on leading strategic transactions and raising capital; financing and providing risk management for clients’ renewable energy projects; underwriting debt with a sustainable use of proceeds; and supporting clients’ sustainable initiatives, such as research and sharing of insight and best practices.
The bank has already participated in a range of large clean financing and strategic transactions since the beginning of last year, including a total of nearly US$15bn of sustainable debt underwriting in 2016.
More sustainability, more fossil fuels
JP Morgan’s clean financing commitment is one of two new strategic goals it is now building onto its strategy to advance sustainable solutions – the other being that it will source renewable power for 100% of its global energy needs by 2020.
While these two goals are undoubtedly a noteworthy ambition, they may be met with raised eyebrows just one month after JP Morgan was mentioned in a report as one of 12 banks that have increased their financing of environmentally destructive sectors of the fossil fuel industry, including “extreme oil” and LNG, in the two years after the Paris Agreement on climate was agreed. This despite a general downturn in bank fossil fuel financing.
The report, Banking On Climate Change 2017, was compiled by a group of NGOs that monitor financial activity.
While Robert says she isn’t familiar with the specific report and therefore can’t comment on it, she emphasises that JP Morgan’s sustainability goals have been underway for a while. The bank has also achieved a number of other important sustainability milestones over the last decade; for example, it has put an end to the direct financing of new coal projects.
But when it comes to oil or LNG financing, the bank has no intention to change its current approach. “We recognise that conventional energy sources are still going to be a part of the global energy mix and satisfying global energy demands,” Robert says.
She instead notes that JP Morgan’s activities are governed by high-standard policies and principles outlined in its Environmental and Social Policy Framework, which reflects the bank’s commitment to playing a key role in promoting sustainable growth.
“Over time we have really developed an environmental and social risk policy framework and looked for ways to be a leader in how we engage with our clients who are part of transactions which we acknowledge may have detrimental impact on the environment and for society,” she says.
“From that standpoint, we think we have the opportunity to help clients implement best practices in this space. We have always been engaging with our oil and gas and LNG clients in ensuring that they are operating in a responsible manner.”