Climate change poses a systemic risk, with estimated global GDP loss of 11-14% by midcentury under current trajectories.1 The climate crisis is primarily caused by fossil fuel production and combustion, which is enabled by funding from financial institutions. According to scientific consensus, limiting warming to 1.5°C means that the world cannot develop new oil and gas fields or coal mines beyond those already approved (new fossil fuel exploration and development). 2 Furthermore, existing fossil fuel supplies are sufficient to satisfy global energy needs.3 New oil and gas fields would not produce in time to mitigate current energy market turmoil resulting from the Ukraine War.4
JPMorgan Chase (JPM) has committed to align its financing with the Paris Agreement,5 achieving net-zero emissions by 2050, consistent with limiting global warming to 1.5°C.6 However, JPM’s policies and practices are not net-zero aligned.
JPM is the world’s largest funder of fossil fuels, providing over $382 billion in lending and underwriting to fossil fuel companies during 2016-2021 (34% more than the second-highest bank), including over $116 billion to 100 top companies engaged in new fossil fuel exploration and development.7 CEO Jamie Dimon continues to make public statements calling for new oil leases and gas pipelines.Without a policy to phase out financing of new fossil fuel exploration and development, JPM is unlikely to meet its climate commitments and merits scrutiny for material risks that may include:
• Greenwashing: Regulators are tightening and enforcing greenwashing regulations, which could result in fines and settlements.9
• Regulation: Central banks, including the Fed, are starting to implement climate stress tests10 and scenario analyses,11 and some have begun to propose increased capital requirements for banks’ climate risks.12
• Competition: Dozens of global banks have adopted policies to phase out financial support for new oil and gas fields13 and coal mines. 14
• Reputation: Campaigns targeting JPM’s climate policies include hundreds of organizations with tens of millions of global members and supporters, including current and potential JPM customers.15
By exacerbating climate change, JPM is increasing systemic risk, which will have significant negative impacts – including physical risks and transition risks16 – for itself and for diversified investors.
Best practices for banks to achieve net zero involve financing of companies reducing scopes 1-3 absolute emissions and allocating capital in line with science-based, independently verified short, medium and long-term decarbonization targets. Organizations like the Science Based Targets initiative and Transition Pathway Initiative can provide independent verification of decarbonization targets.