A move by US banking giant JP Morgan Chase to align its corporate financing with climate objectives is a sign that Wall Street is “waking up” to the financial risks and opportunities of climate change.

The New York-based lender announced yesterday that it will pursue a Paris Agreement-focused investment agenda, and “help clients navigate the challenges and capitalise on the long-term economic and environmental benefits of transitioning to a low-carbon world”.

Large financial institutions have faced increasing pressure from investor groups and climate advocates in recent years over their continued support for carbon-intensive industries at a time when climate change is a growing concern.

Ben Ratner, from the US-based advocacy group Environmental Defense Fund, described the decision as “a signal of change and a stride forward for the bank” that sets an example for other institutions and asset managers to follow.

“Financial firms like JP Morgan must use their leverage to support public policies that accelerate innovation and manage systemic climate risk,” he added. “Companies that block climate policy directly or through trade associations do not belong in a climate-friendly loan book.

“As the world’s largest financier of the fossil fuel industry commits to align financing to the Paris Agreement goals, the road is clear for other banks and asset managers to raise their climate ambition.”


JP Morgan Chase will set 2030 climate targets across its financing portfolio

In a study published earlier this year, JP Morgan was found to be the banking industry’s largest financer of fossil fuel assets by far. The Banking on Climate Change 2020 report shows that since the Paris Agreement was signed in 2015, the US bank provided more than $269bn in financing to the sector, as of 2019.

Ratner said: “The strength of any climate pledge depends on putting a timely and transparent plan in place to achieve it. JP Morgan should establish sector-specific expectations – including ambitious near-term targets that are Paris-aligned – and make access to capital contingent on corporate climate performance.”

The bank has said it will set an intermediate emissions target for 2030 across its financing portfolio, more details of which will be provided in the spring of next year.

It will also place a particular focus on the oil and gas industry, where “commercially-available solutions” to replace these fuels are currently “not adequate” – as well as prioritising the electricity generation and automotive sectors.

Daniel Pinto, CEO of JP Morgan’s Corporate & Investment Bank, said the firm will work with clients, policymakers and advocates to transition the economy towards low-carbon.

The bank added in a statement: “Significant changes in policy and the creation of new technologies will ultimately be required to reach net-zero emissions by 2050, particularly in those industrialised sectors that today lack alternatives.

“To that end, JP Morgan Chase will continue to advocate for market-based policy solutions, including a price on carbon and the commercialisation of new technologies that can help advance deep decarbonisation.”


Paris alignment sends a ‘powerful signal’ to wider industry

A Center for Carbon Transition will be established that will provide corporate investment and commercial clients with “centralised access” to research and advisory services that will help them to make sustainability-focused financing decisions.

“The transition to Paris-alignment will require big ideas, technology innovation and financing,” said Rama Variankaval, who will lead the new business unit. “This group will enable us to leverage the best of our expertise and resources across the firm to help all our clients thrive in a low-carbon future.”

Executing the strategy will be “no easy task”, according to Center for Climate and Energy Solutions president Bob Perciasepe, but by doing so JP Morgan can “position itself as a critical player in driving clean energy technology development and deployment”.

He added: “By aligning its financing with the Paris climate goals, the bank is sending a powerful signal that will help steer utilities, automakers, and oil and gas companies further along the path to decarbonisation.”

Paul Bodnar, chairman of the Rocky Mountain Institute’s Center for Climate-Aligned Finance – of which JP Morgan is a founding member – said: “This is a small step for a bank, but a giant leap for climate alignment. Only collective action by financial institutions, in concert with their clients, can drive progress fast enough towards a net-zero emissions global economy.”