It’s hard 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. The market research firm YouGov ranks Citibank among the most popular banks in the United States. It’s also the world’s second-largest financier of fossil fuels, according to a recent report by the Rainforest Action Network, an environmental group.
Early last year, like many other financial institutions, Citigroup committed to stop adding greenhouse gasses to the atmosphere and to become carbon neutral by 2050. But when a small group of shareholders introduced a proposal pressing the bank to stop financing new fossil fuel projects this year, the board balked.
The proposal was defeated in a vote at Citigroup’s annual shareholder meeting a few days ago, just like similar efforts at other banks in the past few weeks. Bank of America, Credit Suisse and the Royal Bank of Canada were among them. Shareholders at Morgan Stanley and JPMorgan Chase are expected to vote on similar proposals soon.
We talked last week about the mounting pressure on Big Oil to change the global business of energy. This is an example of what that pressure 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 transactions involve major oil companies dumping their dirtiest operations in order to hit climate targets. But those operations are often taken over and stepped up by lesser-known companies with no climate policies at all.
Recent shareholder proposals have argued that banks can only become carbon neutral by their self-imposed deadlines if they stop funding new oil and gas fields now. That’s based on an assessment by the International Energy Agency last year, which said there is no room for new fossil fuel developments if the world is to neutralize emissions by 2050.
Those far-off dates sometimes don’t feel urgent. But at the Citigroup meeting this year the debate got personal when John Harrington, the investor whose firm presented the proposal to cut financing immediately, got his chance to speak.
He told his fellow shareholders how a wildfire had burned down his home of 30 years in Napa Valley. It came with no warning, he said, and he and his wife barely escaped alive, “driving through fire and smoke” until reaching safety.
“This story has been repeated in many parts of the world,” Harrington said. “It is our future thanks to climate change and our banks’ continuing to finance fossil fuels.”
A few questions about the proposal followed before Jane Fraser, the Citigroup chief executive, responded. She said that the company agreed that emissions must be reduced and added that the war in Ukraine had highlighted the need for a faster transition to renewable energy.
“With that being said,” she added, “it’s not feasible for the global economy, for human health or livelihood, to shut down the fossil fuel economy overnight.”
Lauren Compere, a managing director at Boston Common Asset Management who worked on the shareholder proposal to Citigroup, said she expected a lot more of these resolutions to be filed in the future.
Investor expectations on clearly understanding climate risks are and how companies are managing them are growing, she said. “This is not going away,” Compere said.
Shareholder resolutions don’t typically need majority support to be enacted. A result of over 30 percent of support for a proposal can help bring company management to the negotiating table. And while shareholders don’t have the power to enact policy, they can elect the members of the board that manages the company.
Back in 2020, for example, almost half of JPMorgan’s shareholders voted for the bank to disclose how it intended to align its lending practices with the Paris Agreement, the accord in which countries committed to preventing catastrophic global warming. The following year, the bank made a similar commitment.
At Citigroup, the fossil fuel proposal was approved by only 11 percent of voters. Still, major shareholders such as 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 major asset managers such as BlackRock and Vanguard to pass these resolutions, which they didn’t have this time.
But most proposals got more than the 5 percent support needed to be presented again. They likely will.
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Before you go: Does ‘sustainable fashion’ mean anything?
How does a company that built its business model on overconsumption even become sustainable? Vanessa Friedman, the chief fashion critic for The Times, doesn’t get it, either. Maybe sustainability, which, as she writes, implies the ability “to continue over a period of time,” doesn’t fit with the ever-changing world of fashion. She proposes a reframing: “responsible fashion.” This means brands and manufacturers take responsibility for the impact of their choices.
Thanks for reading. We’ll be back on Friday.
Claire O’Neill and Douglas Alteen contributed to Climate Forward.
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