Dive Brief:

• The Rocky Mountain Institute, a clean energy nonprofit, launched the Center for Climate-Aligned Finance on Thursday with financial backing from JPMorgan Chase, Bank of America, Wells Fargo and Goldman Sachs.
• With the goal of cutting carbon emissions to net zero by 2050, the center aims to collaborate with banks to design guidance for working with carbon-heavy sectors such as steel or utilities, and to help banks determine which climate benchmarks and data to follow.
• Banks are increasingly seeing the value — not just in optics but in revenue — of environmentally responsible investment.

Dive Insight:

About 130 banks committed last year to align their business with the goals of the U.N.’s Paris Agreement on Climate Change, as well as its Sustainable Development Goals.

In the past year, Goldman Sachs laid out a 10-year goal to commit $750 billion in loans, underwriting, advisory services and investments toward companies and projects focused on renewable energy, sustainable transportation and affordable education.

Citi pledged in April to stop providing financial services to thermal coal-mining companies by 2030.

Wells Fargo has increased its investment in solar energy.

And banks have found there are consequences for not doing so. Climate change-related policy shifts such as a carbon tax could cost the financial industry up to $1 trillion, a February study by management consulting firm Oliver Wyman found.

The global responsible loans market increased 40% between July 2018 and July 2019, an S&P Global Ratings report found.

Alex Liftman, Bank of America’s global environmental executive, told American Banker the bank has committed to using only renewable energy and incorporating climate impacts into its risk management.

“But decarbonizing a whole economy is enormously complex and really challenging,” she said. “As ambitious as all of the work is … we recognize that no one player can drive progress alone.”

Paul Bodnar, chair of the center and managing director of the institute, said the Poseidon Principles, which encourage financing of more environmentally friendly shipping vehicles, influenced the center’s creation.

“One sector provides the lifeblood that powers all the others, and that is finance,” he told American Banker.

Climate activists indicated the center is an initiative to watch.

“It could drive real steps toward banks aligning with 1.5°C,” Jason Opeña Disterhoft, senior climate and energy campaigner at Rainforest Action Network, said in a statement emailed to Banking Dive, referring to a goal of limiting global temperature increase. “But it could also be used as an excuse for banks to keep supporting the world’s worst climate polluters.

“The four founding partner banks include three of the top four fossil banks in the world, and together are responsible for more than $700 billion in fossil financing since Paris,” he added. “The four of them bank a clear majority of the companies doing the most to expand oil, gas and coal.”

The Rocky Mountain Institute did not disclose how much financial support the banks provided.