Asset managers lobbying governments to dampen sustainable finance policies

Analysis of the 30 largest financial institutions shows contradictions in sustainable policies

The world’s largest banks and asset managers that have committed to net-zero targets are still members of associations lobbying governments to weaken sustainable finance policies, and have overweight positions in ‘brown’ companies, a report has found.

Climate think tank InfluenceMap analysed the 30 biggest financial institutions from across the globe for the report A Comprehensive Climate Assessment of the World’s Largest Financial Institutions, which included 27 with banking arms, 25 with asset management businesses and two global insurers. All but one of these organisations have signed up to the Glasgow Financial Alliance for Net Zero (GFANZ), which commits them to set substantial 2030 decarbonisation targets and achieve net zero by 2050. China’s Ping An Group has not yet signed.

The report found only 11 have “concrete” 2030 climate targets and that financial institutions “remain reluctant to introduce meaningful fossil fuel exclusion policies” and their banking and asset management arms remain highly active in the financing of coal, oil and gas providing $740bn in funding to fossil fuel production.

Lobbying

Disappointingly, all 30 groups remain members of industry associations that have consistently lobbied governments to dampen key sustainable finance policies in Europe, the UK and US. These policies require transparency around the financing of environmentally harmful activities, including fossil fuels. 

Furthermore, half the group are members of real-economy industry associations that are “key blockers of action on climate change”, according to the report, lobbying directly in line with fossil fuel interests, including the US Chamber of Commerce and the American Gas Association.

However, BNP Paribas, AXA and Allianz were highlighted for engaging positively on sustainable finance.

Asset management

Looking at portfolios, the report surmised the 30 firms’ equity strategies are heavily overweight in companies that are not transitioning from brown to green technologies fast enough to be aligned with a 1.5 °C target, despite 22 of the 25 financial institutions’ asset management businesses being involved with the Climate Action 100+ (CA100+) initiative to actively engage with companies on aligning business models with the Paris Agreement. In particular, CA100+ signatories Santander and TD Bank Group scored low on stewardship.

The report predicted that five years from now the portfolios will on average:

  • produce 50% too much coal and 12% too much oil;
  • hold 18% too much coal power capacity and 60% too little renewables capacity;
  • produce 55% too many internal combustion engine vehicles and only 25% of the electric vehicles needed.

Fossil fuels

Financial organisations’ banking arms cumulatively facilitated at least $740bn in primary financing to the fossil fuel value chain in 2020 and 2021 largely through corporate lending and bond underwriting. This was made up of:

  • At least $697bn for oil and gas production (which includes $145bn to five of the largest listed oil and gas companies, ExxonMobil, Chevron, Shell, TotalEnergies and BP, all of which plan to continue exploration and development).
  • $42bn for coal production, including $17.5bn cumulatively provided to Glencore by 21 of the 27 institutions with banking activities.

J.P. Morgan was highlighted as the biggest enabler of fossil fuel financing with $81bn in 2020-21, despite setting a 2030 target to reduce power sector emissions. It increased its financing of coal production from $1.28bn in 2020 to $3.08bn in 2021. Citigroup and Bank of America were not far behind with $69bn and with $55bn respectively.

InfluenceMap senior analyst and report author Eden Coates said: “These global financial institutions have significant economic and political influence, and they are delaying action that is essential to respond to the climate crisis.

“There is a stark disconnect between what they say about climate change and what they’re actually doing – particularly when it comes to pushing back on policymakers’ attempts to align financial regulation with climate goals.

“If they are serious about achieving their net zero targets, they should set concrete and actionable short-term targets across all aspects of their operations.”