Bank Policy Rollbacks: Three Steps Backwards For The Climate

Several North American banks have recently stepped back from their climate commitments, shifting to due diligence approaches. These major players are Bank of America, PNC, and Bank of Montreal (BMO), and their reversals come amid a fierce anti-ESG movement in the USA, with some institutions explicitly citing it as a reason for backtracking. However, these banks’ original commitments were already weak, allowing them to continue business-as-usual with fossil fuel companies, as highlighted in the latest Banking on Climate Chaos (BOCC) report.

The latest edition of the Banking on Climate Chaos report (1) was released last month, revealing a familiar story: North American banks are still leading global fossil fuel financing. JPMorgan Chase, Citi and Bank of America remain at the top of the 60 international banks examined (2). Despite a slight decline in overall financing, hundreds of billions are still flowing to fossil fuel expansion, in a context where some of these fossil fuel financing leaders are withdrawing previously adopted commitments.

In the coal sector, Bank of America, PNC, and BMO have all turned exclusion-based policies into case-by-case approaches. They were formerly prohibiting direct financing at least for new coal plants (PNC), with additional exclusions of new coal mines (Bank of America) and some weak corporate-level measures (BMO). The latter withdrew its policy document, and for the others, commitments now fall into escalation frameworks (3), with financing decisions being made by risk management committees. In other words: due diligence processes only, while the most carbon-intensive sector worldwide requires the firmest commitments possible. These three banks join two US-based institutions and 12 Asian groups (4) in lacking systematic exclusion policies for the coal sector among the world’s 60 biggest banks.

In terms of oil and gas, Bank of America and PNC had previously made exclusion commitments, but they were nowhere near those adopted by the most advanced European institutions. PNC excluded oil and gas development in the Arctic National Wildlife Refuge (ANWR) which, despite its rich biodiversity, represents only a small fraction of the broader Arctic ecosystem (5). Bank of America’s policy was also limited, excluding only oil activities within the Arctic Circle. BMO so far has maintained its weak commitments for the hydrocarbons sector, that also concern the ANWR only.

These policy reversals are happening amid a strong anti-ESG backlash in the United States. In several states, Republican majorities have been pushing a pro-fossil fuel agenda, leading some financial institutions to fear losing business if they maintain their climate commitments. Some have notably adapted their public communication to a more moderate tone, like asset management giant BlackRock (6). BMO publicly stated it dropped its coal policy to avoid a ban in West Virginia, where the Treasurer labeled financial firms as “energy boycotters”, including other major institutions like Citi or HSBC. The banks on the list later made public claims that they were maintaining high levels of fossil fuel financing, in contradiction with some of their own commitments.

The growing defiance of major North American financial institutions towards extra-financial criteria is evident from other recent decisions. Four major “Wall Street banks” have withdrawn from the Equator Principles, an initiative aiming at more transparency concerning project financing, notably in the fossil fuel sector. JPMorgan Chase also changed its approach with an “energy mix target”, which may obscure the relative levels of financing the bank is providing for high versus low carbon activities. However, not all major banks on the continent have behaved similarly. Goldman Sachs and Morgan Stanley have maintained their policies despite their business model being comparable to Bank of America’s (7). Moreover, no major bank has left the Net-Zero Banking Alliance (8) so far: all remain committed to decarbonization goals, albeit flawed ones, which also underlines how limited the level of ambition of this alliance can be.

A look at the wording of these commitments shows that they were never sufficiently strong. To begin with, they were all centered around project financing, which represents a tiny share of total financing to the fossil sector (9). The few corporate-level measures (in BMO’s policy) concerned new clients only. Regarding oil and gas, it is worth noting that this backtracking also has a symbolic meaning. These policies were meaningful to communities that advocated for them (10) and a bare minimum to protect the Arctic from extractive industries – their absence now raises the level of uncertainty these communities have to live with. Still, diving into financial data shows that some banks were providing a high level of support for fossil fuels even while they had policies on the books, with some even increasing it.

Such is the case for the heavyweight Bank of America, which saw a seven-fold increase in its coal mining financing between 2021 and 2023. Its support for coal reached its highest since the Paris Agreement in 2023, so did BMO’s, despite their 2021 policies. Despite a noticeable three-year decline in fossil financing amounts, Bank of America remains the fourth banker globally of fossil fuel expansion over the period. PNC’s financing to the coal sector peaked in 2022. In 2018, it showed a 58% increase in financing to fossil expansion compared to the previous year, backing fracking companies like Permian Resources and Diamondback  Energy (11). In 2023, it had the fourth biggest relative exposure to fossil fuels (12). All this in spite of its 2017 policy. BMO also has its dirty clients: Enbridge, Canada Development Investment Corp and TC Energy Corporation weigh over one third of total financing over 2021-2023 (13).

Table 1.

Evolution of financing to companies expanding fossil fuels by Bank of America, BMO and PNC considering the year of adoption of their fossil fuel policies

Sources: Banking on Climate Chaos analysis (data extracted through London Stock Exchange Group and Bloomberg), internal tracking of oil and gas/coal policies by Reclaim Finance.

PNC, BMO and Bank of America’s former policies show that they are more sensitive to reputational risks than actual climate concerns. They had adopted low-impact commitments to greenwash their public image, and now have dropped them to enhance their attractiveness. Some of them are systematically ranking among the top fossil fuel financiers. If they ever adopt climate policies again, these three institutions must ensure these commitments are far more substantial than their previous ones.