Bank of America has joined Goldman Sachs in making a new commitment to clean energy. BofA is making a $50 billion dollar 10-year plan, which is $10 billion more than Goldman over the same time frame, so it wins the headline arms race. But BofA’s announcement shares the same faults as Goldman’s. (Full disclosure: I used to work in the Goldman’s Environmental Markets Group, which in part set and tracked the firm’s green initiatives).
Both announcements are deeply depressing. These dollar figures are basically the amount of financing and investment the banks will offer to businesses and consumers to do things like expand wind and solar energy production and increase energy efficiency. It you listen to the story banks tell about what they are great at — raising capital, allocating risk, etc. — they should be diving into this market.
But instead of ambitious plans, we get very small amounts of good wrapped up in press releases aimed at grabbing headlines and generating glossy sustainability reports. It’s pretty pathetic, but not entirely surprising. Since the financial crisis, banks have largely failed in their efforts to prove their social utility; climate change is no different.
Just how minute is BofA’s $50 billion decade-long commitment (aka $5 billion a year) in the context of their other businesses? In 2011, they extended $557 billion in credit and raised $644 billion in capital for clients. Of that $1,201 billion, $5 billion is just 0.4%. That’s just not enough. The International Energy Agency estimates that the global economy needs $36 trillion in additional green investment by 2050 (just under $1 trillion a year). 0.4% of capital raised and credit extended certainly is not a number BofA should be praised for.
There’s also the small problem of BofA’s large role in financing US coal companies. Topping the US coal-financing league table is directly at odds with the intent of their environmental commitment. They do have a corporate policy on coal, but it’s phrased to mean as little as possible and restrict lending to only a few offenders. BofA will “phase out financing of companies whose predominant method of extracting coal is through mountain top removal”. [emphasis added] They also strangely say that mountaintop removal mining can be done with minimal environmental impact. I don’t know anyone not paid by the coal industry who’s ever come to that conclusion.