Greenwashing Alert: US Mega-Banks Rank Poorly on Sustainability Indicators
Greenwashing is prevalent amongst large US banks. In “Ranking the Banks”, a recent report by the Interfaith Center on Corporate Responsibility and Sustainalytics, seven major US banks were rated on four different indicators relating to sustainability and corporate responsibility. The report ranks the financial institutions and their activities across select “social themes,” including their environmental consciousness, their tendencies to follow laws and regulations, and the way they perceived and handled investment risks. The findings of the report do not paint a pretty image of mega-banks like Citi, Morgan Stanley, Bank of America, and JP Morgan Chase; the highest score amongst the group was 60/100. Would you trust your money with an institution that got a D-?
“Greenwashing,” a marketing technique that mega-banks use regularly, refers to the practice of promoting environmentally-friendly initiatives while simultaneously engaging in environmentally-damaging activities. Greenwashing is most evident through mega-banks’ investment in large-scale coal operations. While each of the banks examined has publicly stated its concerns about climate change and its commitment to a low carbon economy, a separate report by BankTrack found that since 2005, nearly $223 billion has been invested in the world’s top coal mining companies on the part of commercial banks.
Banks like Chase publicly post figures and quotes about their renewable energy investment. “Climate change is an issue of growing importance to our clients and stakeholders around the world… JP Morgan’s Energy Investment Group is focused on putting capital to work in US-based renewable energy projects, including solar, wind, and geothermal,” their website touts. Despite their stated commitment, the Energy Investment Group has invested a modest $3.2 billion in renewable projects from 2003-2010. According to Banktrack.org, JPM has invested $8.15 billion in coal projects from 2005-2013 – more than double their stake in renewables. This figure is nowhere to be found on Chase’s website.
The ICCR and Sustainalytics report rated commercial banks across four key performance indicators (KPIs) drawn from socially responsible investment themes: risk management, responsible lending, executive compensation, and political contributions. Overall, the data presents a very negative picture of mega-banks. There was no apparent link between executive compensation and financial or environmental, social, and corporate governance (ESG) performance, though salaries were exorbitant across the board. The report raised considerable concerns about the systematic exclusion of environmental and climatic risks in commercial banks’ investment decisions, as well as the use of corporate treasury funds to influence regulations and policy. In short, the majority of large commercial banks are up to the opposite of what you believe they should be doing – even if they’re saying otherwise.
Laurence Loubieres of Sustainalytics warns that “Banks play a major role in the way other industries operate.” It is essential to recognize the influence the banking industry has over the economy as a whole, and to let mega-banks know that they need to begin considering the long-term dangers of activities like coal mining and buying off politicians. As a consumer, you can take an important step by cutting ties with your mega-bank. Divert your support from unsustainable commercial banks to a community development bank or a local credit union, and take the pledge to stop using your mega-bank’s credit card. You can promote responsible, sustainable investment in your community today, and send the message that short-term rewards for a few do not outweigh long-term risks for many.