Bank Of America Is Breaking Its Promise To Not Finance New Coal Projects

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by Tyler Durden
Tuesday, Feb 06, 2024 - 10:45 AM

At the same time we are seeing the implosion of the ESG grift on a broad scale - including fund managers admitting it leads to poor returns and "climate-based" ETFs closing up - Bank of America is now doubling back on statements it once made about no longer investing in new coal mines. 

The bank had won the favor of climate activists about two years ago, a report from the NY Times this weekend wrote, for saying it wouldn't finance new coal mines or coal burning power plants.

Now, the bank has backtracked and said such projects would simply be subjected to "enhanced due diligence". 

The bank said clients or transactions “that carry heightened risks will continue to go through an enhanced due diligence process involving senior level risk review.”

Prior to that, in 2021, it had said it “will not directly finance new thermal coal mines or the expansion of existing mines” or “petroleum exploration or production activities in the Arctic" and that it would not  “directly finance the construction or expansion of new coal-fired power plants, including refinancing recently constructed plants”.

Bank of America's recent decision is a response to growing opposition from Republican lawmakers against companies incorporating environmental and social considerations into their operations, the report says. This backlash, often termed "woke capitalism," has ensnared Wall Street in the broader cultural and political debates.

As the NY Times notes, several states, including Texas and West Virginia, have implemented financial regulations to protect fossil-fuel companies' access to banking services.

These actions have unsettled the ESG landscape, leading to a significant outflow of funds from sustainability-focused investments as investors distanced themselves from the sector due to conservative criticism. 

Bank of America had previously acknowledged the challenges faced by coal as a major contributor to global warming and expressed awareness of the unique considerations related to the Arctic region, including environmental fragility and Indigenous Peoples' rights. However, these statements are no longer present in its updated policy, and the bank has not disclosed the specifics of its risk assessment process, the report says. 

In a similar vein, JPMorgan Chase recently announced a significant change in its annual climate report, shifting from an emissions-reduction target for oil and gas to a new "energy mix" target encompassing clean energy financing. Environmental groups criticized this change, asserting that it obscured the bank's prior commitments.

JPMorgan defended its modified target by stating that a sole focus on fossil fuels would not effectively facilitate the required transition of the global energy system.

Furthermore, global conflicts in Europe and the Middle East are redirecting banks' attention towards energy security, as mentioned by Citigroup's CEO, Jane Fraser. This shift prioritizes continuous energy production over environmental concerns among supporters of energy security.

Climate activist Lucie Pinson told the NY Times:  “Bank of America is sending a message to its clients that it’s OK to take up new fossil-fuel assets. We should have stopped developing such assets years ago.”

Recall, we have written about the dying off of ESG and "green" investment products over the last few months. Most recently, at the end of 2023, Goldman Sachs shuttered its ActiveBeta Paris-Aligned Climate U.S. Large Cap Equity ETF. 

Bloomberg ETF analyst Eric Balchunas pointed out last year that "there was just way too much supply for the demand" with the ETF and that "it's going to get worse too". Balchunas says the ETF only took in $7 million over the course of 2 years. 

We also wrote about Jeff Ubben late last year, who shuttered his sustainability fund - calling traditional climate summitry an “echo chamber” of diplomats. Less than a week before that we noted that $30 billion had been shaved off the value of clean energy stocks over the preceding 6 months. 

Finally, we pointed out last year how the ESG grift was reaching endgame after Markus Müller, chief investment officer ESG at Deutsche Bank's Private Bank stated that sustainability funds should include traditional energy stocks, arguing that not doing so deprives investors of a prime opportunity to invest in the transition to renewable energy.