Dive Brief:

• An examination of 2030 sector energy sector targets, exclusion policies and climate-related disclosures for six major U.S. banks found that — while the entire group has 2050 net-zero targets — some of the banks have started to differentiate themselves by providing more comprehensive disclosures, according to a forthcoming report from the Sierra Club.
• The report is based on publicly available disclosures from JPMorgan Chase, Bank of America, Citi, Wells Fargo, Goldman Sachs and Morgan Stanley as of September. The researchers compared the banks’ policies to an amalgamation of key standards and recommendations within the banking sector, Ben Cushing, the director of the environmental nonprofit Fossil-Free Finance campaign, told ESG Dive.
• While the report finds increasing “daylight,” or separation, between the banks on certain climate disclosures, it also considered the banks “relatively equal” on their progress toward net zero, and determined that the banks are not on track to reach their goals. “What we see today in terms of their implementation and operationalizing of those [net-zero] commitments is far from sufficient,” Cushing said in an interview Tuesday.

Dive Insight:

The report represents an update on the major banks’ progress since 2022, when Sierra Club published the first edition of its “Leaders or Laggards” report. All six banks are members of the Net-Zero Banking Alliance and have published 2030 emissions targets for high-emitting sectors, including energy and power generation since the first edition of the report. 

Cushing said the group compiled the practices based on the recommendations and standards of other civil society and industry groups like NZBA and Reclaim Finance. The report found that “in general, the targets and exclusion policies of the major U.S. banks fall far behind international best practices” and recommended the banks raise the ambition of their 2030 targets, strengthen exclusion policies and improve the “transparency and comprehensiveness” of their climate disclosures to reach their 2050 net-zero goals.

“Despite some small bright spots, across the board, all six major US banks are significant laggards when compared to the global best practices set by some of their counterparts abroad,” the researchers said.

Citi, however, finds itself largely outpacing its U.S. peers on targets, exclusion policies and climate disclosures. 

It’s one of two U.S. banks — alongside Wells Fargo — that have made commitments to reduce absolute financed emissions in the oil and gas sector, which the Science Based Targets initiative recommended in May, as opposed to emissions reductions based on carbon intensity. 

Citi is also the only of the six banks to commit to ending project-level oil and gas financing in the Amazon and the Arctic. Citi updated its policy to include the Amazon financing exclusion in July, following pushback from Indigenous rights activists. Goldman Sachs, JPMorgan, Morgan Stanley and Wells Fargo have each committed to not directly finance oil and gas projects in the Arctic. Cushing said the next step would be for the banks to include corporate-level financing in those exclusions. Bank of America requires enhanced due diligence for oil and gas financing in the Arctic but does not have a direct financing exclusion.

On coal financing, there is more of an overlap in the sector. Citi, Goldman Sachs, JPMorgan, Morgan Stanley and Wells Fargo each have policies excluding project-level financing for new or thermal coal mining. Citi, JPMorgan, Morgan Stanley and Wells Fargo also each have different corporate-level financing exclusions. Bank of America requires enhanced due diligence for any thermal coal mines or companies with more than 25% of their revenue derived from coal mining.

On climate disclosures, Citi and JPMorgan are the only banks that have agreed to publish their ratio of fossil fuel to clean energy financing in response to a shareholder proposal put forward by New York City Comptroller Brad Lander. Lander’s proposal failed at BofA, Goldman, JPMorgan and Morgan Stanley this proxy season. Citi, in response to a proposal by shareholder advocate As You Sow, was the first U.S. bank to disclose an assessment of its clients’ abilities to execute their transition strategy. That report found that 71% of the bank’s energy clients lack a substantive transition plan or the ability to execute it.

Cushing said that while Citi performs better than its peers on certain metrics, “it should [also] be understood that they still have a long way to go to actually be on track to meet their commitments and align with global best practice.”

The emergence of global best practices on issues of targets, exclusion policies and disclosures have largely emanated from Europe, Cushing said. The report notes that French banks BNP Paribas and Société Générale have set targets for reducing their lending exposure to oil and gas exploration and production. 

BNP Paribas — the European Union’s largest bank — has also announced it will stop financing the development of new oil and gas fields and underwriting bonds for oil and gas producers. On disclosures, Europe’s largest bank, U.K.-based HSBC published the bank’s first-ever transition plan in January, detailing how it plans to reach its goals and that it will reconsider financing clients “who after repeated engagement are deemed incompatible with the firm's targets and commitments.”

“The role of major banks is critical for ensuring a sustainable and prosperous future,” Cushing added in an emailed statement. “Stronger action is urgently needed, including improvements to U.S. banks’ climate targets, policies, and disclosures — and ultimately an end to their financing of fossil fuel expansion.”

The report follows another from climate risk data and analytics provider Climate X that found most large global banks are unprepared for the risks associated with climate change. That study also found that U.S. banks had the lowest climate adaption maturity level of the regions assessed.