‘As You Talk’: How Value-Based Banking Can Help Fight the Climate Crisis
In the latest episode of As You Sow’s new series “As You Talk” on Clubhouse, Danielle Fugere, president of AYS and Ivan Frishberg, director of Impact Policy at Amalgamated Bank – America’s largest socially responsible bank – discuss the important role banks have in addressing the climate crisis.
Banks have a history of funding companies and technologies that produce vast amounts of climate-damaging greenhouse gas emissions – a practice that must stop if the financial sector hopes to do its part in fighting climate change.
Since the 2015 signing of the Paris Climate Agreement, a legally binding international treaty on climate change that aims to limit global warming to below 1.5 degrees Celsius, 60 of the world’s largest banks have continued their trajectory of financing fossil fuels, lending trillions of dollars to climate-polluting companies.
The financial system is beginning to recognize that it must change the way it does business, said Fugere. The good news is that banks appear to be well-equipped to help meet net-zero targets and assist in the transition to a net-zero economy, she said.
Not only is Amalgamated Bank taking action on climate change, says Fugere, but it’s spearheading “several banking and industry initiatives that have moved some of the largest global players in the banking sector to be more rigorous and transparent in their climate commitments.”
Amalgamated Bank has also collaborated with AYS on shareholder engagement, working in tandem to push non-financial companies on issues such as meeting net-zero targets and workplace equity.
“No other bank in America uses its asset management arm to file shareholder resolutions and to stand up to create needed change,” said Fugere.
How are banks taking action on climate?
Amalgamated Bank is a certified B Corporation, publicly traded Public Benefit Corporation (PBC) and member of the Global Alliance for Banking on Values, an international nonprofit and independent network of banks dedicated to using finance to deliver sustainable economic, social and environmental development.
As Director of Impact Policy, Frishberg oversees the measurement of Amalgamated’s impact as a leader in values-based banking, pioneering strategic initiatives including the bank’s carbon and climate commitments.
In an effort to define what it means for Amalgamated to be part of the Paris Agreement, the bank took “a number of immediate actions committing to never again fund fossil fuel finance or fossil fuel infrastructure, but also to be net zero” in its operations, said Frishberg.
Operational emissions which are “a smaller part of our emissions profile, are an important symbol,” he said. “But the biggest impact that banks have is through their loans and investments.”
In order to figure out how to align Amalgamated’s investment portfolio with the Paris Agreement, it had to understand how to measure the emissions driven by the bank’s lending practices. ”If we're loaning money to [a] workforce housing project or multifamily building,” Frishberg said, the bank has to ask, “what are the emissions that come from that property?” Or if the bank is loaning money to a solar energy company, it has to evaluate what emissions were avoided, he explained.
Amalgamated helps launch Net-Zero Banking Alliance
“So, we started working with other banks to develop a methodology,” said Frishberg. “For a bank to say, ‘hey, yes, we want to be transparent and accurate and disclose the emissions of our clients that we lend to,’” that would make “their emissions also attributable to us.”
This year Amalgamated helped launch the Net-Zero Banking Alliance (NZBA), which convenes 43 of the world’s largest banks, to implement the financial sector’s goal of aligning its climate commitments with the Paris Agreement.
Banks that have signed on to NZBA have committed to align the greenhouse gas emissions “from their lending and investment portfolios with pathways to net-zero by 2050 or sooner,” as well as committing to other actions designed to reduce emissions in the financial sector.
“We have over $38 trillion dollars of assets committed from banks and investment houses to measuring and disclosing through one single standard methodology,” said Frishberg. “That's been a big part of our journey. And now that the goal is . . . net zero, how do we then reduce the financial flows to the things that are causing pollution?”
Setting the standards for capital
Frishberg explains that banks are undergoing a philosophical shift in the way they view and accept responsibility for how borrowers spend the money lent to them by financial institutions.
Historically, the attitude banks have had about what happens with the money they lend to borrowers is that it’s none of the bank’s business, nor is it their responsibility. Banks have traditionally behaved as the gatekeepers or stewards of money, but the transition happens when banks start setting the standards for capital, meaning they enforce the terms of a loan to meet not only financial targets, but also emissions targets, he said.
Banks are beginning to understand that “if we're actually going to survive on this planet, we need the finance sector, we need the public sector, and [we need] policy,” Frishberg said.
“For a bank that is actually committed to net zero, it means measuring, disclosing, and gradually bringing down the finance dimensions, which can either mean you tell the oil company client that they need to change their mix and start to move away from oil and gas and into zero-carbon forms of energy, or you start to shift your capital and say, ‘OK, we're going to start to fund less of that stuff and we're going to start [to] fund more of the better stuff. So, it's either transition or reallocation.”
Stay tuned for more episodes of “As You Talk,” which airs Thursdays at noon Pacific on Clubhouse.