(Bloomberg) — Wells Fargo & Co. just became the first major bank to abandon a goal that’s been singled out by the US energy secretary, Chris Wright, as “terrible.”
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On Friday, the bank released a statement announcing it was “discontinuing sector-specific 2030 interim financed emissions targets” as well as its “goal to achieve net zero by 2050 for financed emissions.”
The announcement comes as America’s finance industry adapts to the new political reality of the Trump administration. Wright, a former fracking executive, has slammed what he characterizes as the “aggressive pursuit” of net zero which he says has delivered no benefits, but “tremendous costs.”
It’s part of a steady barrage of Republican attacks on climate policies that banks in the world’s largest economy had embraced less than half a decade ago. In 2021, Wells Fargo chief executive, Charlie Scharf, called climate change “one of the most urgent environmental and social issues of our time.”
On Friday, the bank said its earlier ambitions ended up being out of step with reality.
“When we set our financed emissions goal and targets, we said that achieving them was dependent on many factors outside our control,” Wells Fargo said. It’s now clear that “many of the conditions necessary to facilitate our clients’ transitions have not occurred.”
The announcement comes just months after Wells Fargo quit the world’s biggest climate coalition for banks — the Net-Zero Banking Alliance — together with the rest of its US peers. That exodus started one month after the Nov. 5 election returned Donald Trump to the White House.
Climate experts warn the development will ultimately inject more risk into the finance industry.
“This kind of repudiation is just doubling down on taking on more transition risk,” said David Carlin, the former head of risk at the United Nations Environment Programme Finance Initiative and the founder of D.A. Carlin and Company. “It makes it harder to effectively help clients cope with a changing world and it just feels like a plan to dismantle the work they had already done in preparing for the transition.”
Wells Fargo says a single bank can’t deliver net zero emissions if the economy it serves is on a different trajectory. It’s a line that a growing number of financial firms have started repeating. Most recently, the new chief sustainability officer of HSBC Holdings Plc, Julian Wentzel, said it’s time to stop penalizing fossil-fuel clients and acknowledge that energy security is now a top priority.
Ultimately, many banks that committed to net zero were unprepared for the operational changes the decision entails, according to Karl Pettersen, the former chief sustainability officer for the Americas at Societe Generale SA.
“What we have had is a lot of theater with limited substance,” said Pettersen, founder of advisory firm Pettersen Analytics LLC. “No company out there knew how to get to net zero, but there was a time when you had to acquiesce with the popular mood and use the right words.”
In practice, Wells Fargo’s decision to abandon its long-term and interim net zero targets means it’s no longer under pressure to reduce the emissions associated with channeling capital into sectors including oil and gas, steel, aviation and automotive manufacturing.
“In the end, banks will finance what gives them the right return,” Pettersen said.
Wells Fargo said its decision to abandon its targets for financed emissions — a measure that refers to the carbon footprint of lending and investment — doesn’t affect its ambitions to continue investing in low-carbon activities.
The bank can still “play a role in supporting our clients’ climate-related efforts,” it said.
However, Wells Fargo also emphasized its contribution to financing energy clients more broadly. As of Dec. 31, it had about $55 billion of outstanding commitments to oil, gas, pipeline companies, and utilities. Meanwhile, it’s provided more than $20 billion of renewable tax equity since 2006.
Over the past three years, Wells Fargo has “deployed $178 billion of sustainable finance,” it said. That includes $16 billion in renewable energy and over $15 billion in clean transportation finance, the bank said.
“We are adjusting our approach to focus on doing what banks do best,” Wells Fargo said. And that is “providing financing and expertise to help clients pursue their own objectives.”
The bank will maintain its $500 billion 2030 sustainable finance goal, as well as its 2030 operational sustainability goals and its 2050 goal for Wells Fargo’s own operational emissions.
“We will continue to serve clients’ energy needs, meeting them where they are in their chosen energy and transition strategies,” Wells Fargo said.
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Source: finance.yahoo.com
