LGIM backs absolute emissions reduction targets proposal at big North American banks

Trillion-dollar manager discloses voting position on US banking giants as NGO report reveals continued financing flows to fossil fuels.

UK investment giant Legal & General Investment Management (LGIM) has revealed it will support proposals calling for absolute 2030 emission reduction targets for high-emitting sectors at North American banks, including JPMorgan Chase, Goldman Sachs and Bank of America. 

This comes as the latest Banking on Climate Chaos report estimates that the world’s 60 largest banks financed fossil fuels to the tune of $673 billion in 2022. Overall, it estimated that $5.5 billion has been directed by big banks to fossil fuels since the adoption of the Paris Agreement.

The new banking proposal, filed by the Office of the New York City Comptroller, went to the vote for the first time at the Royal Bank of Canada (RBC) on 5 April and attracted support of 17 percent, including from LGIM. 

That tally is significantly higher than the support last year for resolutions calling on US banks to limit their fossil fuel financing in line with the International Energy Agency’s 2050 net-zero scenario, which hovered around the 10 percent mark.  

LGIM backed the 2022 proposals but revealed it did not support a similar fossil fuel phase-out one at RBC last week “as the drafting of the resolution text also sought to restrict financing of broadly defined fossil fuel transportation”. 

Just 7 percent of shareholders supported that proposal at the Canadian bank, which was identified as the largest fossil fuel financier in 2022 by the Banking on Climate Chaos report, published on Thursday.

The annual review of banks by environmental groups accused RBC of financing fossil fuels to the tune of $42 billion last year, knocking JPMorgan Chase off the top spot for the first time since 2019. 

Fossil fuel phase-out proposals have been filed again at US banking heavyweights for 2023 but call for “time-bound phase-outs” rather than IEA-aligned ones, a shift that gives companies more wiggle room and potentially makes phase-outs more palatable to investors.

LGIM announced on Thursday that it will support the refined phase-out proposals at Citigroup, Bank of America, Wells Fargo, Goldman Sachs, JPMorgan and Morgan Stanley. 

The trillion-dollar investment manager will also back another proposal filed at US banks and Canada’s TD Bank that requests disclosure of a transition plan outlining how the target firms will align their financing with 2030 emission goals.  

Fossil fuel loopholes

Banking on Climate Chaos also revealed that for the first time total bank financing to fossil fuel companies was lower than in 2016 – a phenomena that the report put down to record profits in the sector rather than shifting bank policies.  

“Since most bank policies do not exclude financing for fossil fuel companies, there is no reason to think that 2022 is anything but a temporary outlier in the trajectory of fossil fuel finance.”     

The report also highlighted loopholes in banks’ fossil fuel policies and net-zero commitments. It found that only seven of the banks assessed include both lending and underwriting under their targets, despite the fact that underwriting of bonds and equities accounts for 36 percent of all fossil fuel financing.  

Also flagged was the way in which specific exclusions around activities such as Arctic exploration are not factored into general purpose financing.

“While 39 of the top 60 banks have some type of Arctic exclusion policy applicable to projects, this exclusion did not preclude financing for ConocoPhillips’ Willow project, since the company sought financing for general corporate purposes rather than for a specific project,” the report stated.  

It also found that 49 banks that had made net-zero pledges have provided $122 billion to the top 100 fossil fuel expanders.  

Banking on Climate Chaos was put together by groups including the Rainforest Action Network, BankTrack, Reclaim Finance and Sierra Club.   

RBC has not responded to a request for comment at the time of publication.