JPMorgan Chase & Co., the U.S.’s largest bank, is making a considerable investment in carbon-credit markets, a decades-old framework intended to reduce the amount of Earth-warming greenhouse gases but that has lacked major players.
JPMorgan Chase
JPM,
has agreed to invest more than $200 million to purchase carbon-linked credits from several companies, according to a report in The Wall Street Journal out Tuesday. The bank’s participation could deepen the liquidity that makes such markets more attractive for others to dive in.
And for JPMorgan itself, the purchase is a major step the financial institution is taking both to help neutralize its own environmental footprint and to grow its exposure to the fast-growing clean-energy industry
ICLN,
the report said.
“We’re jumping in the pool all in,” Brian DiMarino, JPMorgan’s head of operational sustainability, told the WSJ in an interview. “This is us putting our weight and our capital behind something we believe is truly important to bring to market now.”
Broadly speaking, voluntary carbon-credit markets — and there are more than one — operate when a cap has been set on the total amount of pollution allowed by an entity, depending on the industry and often determined by the country a company is operating in. From there, lighter polluters are allowed to sell the excess amount of polluting credits they’ve earned but don’t need to heavier polluters that might go over the limit. Participation in such a market is voluntary and credits move up and down in price based on supply and demand principles.
The idea is that net-net, less pollution is created than without the markets. Such a mechanism is also meant to encourage companies to run cleaner operations on less energy, for instance, so they have credits to sell as a revenue source. Some of that revenue can go into technology that further helps remove emissions from the atmosphere.
In a related move, JPMorgan helped Climeworks raise $650 million from investors last year as the Swiss startup advanced technology to grab carbon-dioxide emissions from the atmosphere, a nascent process known as direct-air capture. If the operations get to scale, such technology is seen allowing the globe to continue to burn some oil
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and gas
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in the coming decades.
And, JPMorgan is paying for nearly 30,000 metric tons of carbon removal from Charm Industrial, which turns plant waste into a carbon-rich liquid that can be injected underground, the report said.
Bank officials told the WSJ they have also fielded questions from big corporate clients about carbon removal. Critics of carbon removal worry that it doesn’t do enough to discourage the actual drilling and burning of fossil fuels.
For sure, carbon-minded investments grow as JPMorgan and other major banks face their share of lingering criticism from environmental groups, select lawmakers and others because the Wall Street giants still finance the coal, oil and gas industries.
According to the Rainforest Action Network, a coalition of climate-change policy groups, the top 60 global banks by assets provided a total of $1.3 trillion to the top 100 companies expanding fossil fuels between 2016 and 2021 — the years since the 2015 Paris climate accord steered global powers toward a collective goal of holding global warming to 1.5 degrees Celsius.
Of that $1.3 trillion, the big six U.S. banks — JPMorgan Chase, Bank of America
BAC,
Citi
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Wells Fargo
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Morgan Stanley
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and Goldman Sachs
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— provided 33%, or funding valued at about $445 billion, to the top 100 coal, oil and gas production expanders.
On the other hand, the bank has also been criticized by mostly Republican lawmakers and energy-state Democrats for giving priority to environmental, social and corporate governance — or ESG — factors. West Virginia banned JPMorgan from doing business with the state last year, arguing that ESG amounted to a boycott on the state’s coal industry. JPMorgan said the move was “disconnected from the facts” and “anti-free market.”
JPMorgan is also committing to match its own operational emissions from directly consuming natural gas and other fuels with same-sized carbon removal by 2030, one of the first such pledges by a major company.
Source: marketwatch.com
