Boston Common Asset Management
While the rest of the world – including investors, insurers, central banks and bank supervisors, and commercial banks – moves to looking at how to achieve a goal of net zero carbon by 2050, the US government continues to stand alone. The latest regulatory intervention by the US Treasury’s Office of the Comptroller of the Currency (OCC) to prevent sector-wide lending restrictions for the fossil fuel sector, is not only behind the times but is contrary to other federal agencies. In November, the Federal Reserve sent a big signal to investors and banks by applying to join the Network for Greening the Financial System – joining 75 other financial regulators and supervisors including New York’s Department of Financial Services, to address climate change. Federal Reserve Chairman Jay Powell stated “the public will expect and has every right to expect that in our oversight of the financial system we will account for all material risks and try to protect the economy and the public from those risks. Climate change is one of those risks”. SEC Commissioner Allison Lee has leaned in strongly to scope 3 emissions for the financial sector, ESG policies and procedures for fiduciaries and even changes to GAAP and risk-credit ratings. Regional Feds like San Francisco and New York have taken a leadership role with recent convenings to examine climate-scenarios, stress testing, and the role of bank supervisors in addressing climate risk. We are now in a climate emergency and based on policies and commitments, global emissions are not estimated to peak by 2030 – let alone by 2020. Since the Paris Accord came into force, we have seen almost $2 trillion of bank financing of fossil fuels, an amount that dwarfs sustainable finance commitments during the same period. Through Boston Common Asset Management’s five-year engagement of 58 banks global Banking on a Low Carbon Future, Finance in a Time of Climate Crisis, we have seen some progress by the US banks. This includes adopting sector-specific restrictions or enhanced due diligence, engaging their high carbon clients to adopt transition plans, and in some cases based risk assessment excluding specific high risk projects like no oil or gas exploration in the Arctic National Wildlife Refuge. The OCC proposal to “take supervisory or enforcement action,” not only defies logic, it is unethical, not based on science, risk assessment, or economics. Investors, banks, and other federal agencies should forcefully condemn such action by the Trump Administration and ask them to step down.
