Senior decision-makers come together to connect around strategies and business trends affecting utilities.

Post

In Green Move, Banks Start to Account for Carbon Content in Lending

image credit: Credit: Michelle Henderson, Unsplash
Llewellyn King's picture
Executive Producer and Host, White House Media, LLC

Llewellyn King is the creator, executive producer and host of “White House Chronicle,” a weekly news and public affairs program, airing nationwide on PBS and public, educational and government...

  • Member since 2018
  • 86 items added with 85,151 views
  • Aug 16, 2020
  • 1165 views

By Llewellyn King

The Democrats, supporting in whole or in part the goals of the Green New Deal, have, one suspects, a vision of themselves facing off against an implacable opposition of energy companies and financiers committed to business as usual. 

The fact is, if the Democrats win the White House in November, they may find the enemy isn’t fighting. Indeed, they may find energy producers, both oil and natural gas, and the electric utilities are no longer opponents but devout, if questioning, allies in the struggle for carbon neutrality. 

And Wall Street, often identified as the evil force behind the polluters, is striving to be green, and to assess and direct the impact of their lending with a view to reducing carbon emissions and remediating them. 

A remarkable organization, the Partnership for Carbon Accounting Financials (PCAF), has enlisted top global banks and lenders in the decarbonation of the future. In the United States its partners include Amalgamated Bank, Bank of America, Citibank, BlackRock, and Morgan Stanley. A slew of banks spread across western Europe has joined PCAF, including Britain’s NatWest and Denmark’s Danske Bank. Its first task will be to develop organization-wide standards and methodology to assess the carbon impact of their lending.  

Oil and gas entrepreneurs and electric utilities have long been entwined with their bankers. They need each other. It takes a lot of capital to explore for and exploit oil and gas deposits, and the electric utilities have traditionally been the most capital-intensive American industry.  

So complete has been the relationship between banking and energy that American Electric Power, once the nation’s biggest electric power company, had its headquarters on Wall Street for decades before moving it to Columbus, Ohio, where its customer base is. The Edison Electric Institute, now a fixture among the power players in Washington, was headquartered in New York City when I began writing about the utility industry in 1970. Likewise, the Atomic Industrial Forum, a forerunner of the Nuclear Energy Institute, moved to the Washington area.

When the price of oil went down suddenly in the 1980s, a bunch of Southwest banks failed. The banking-energy linkage is absolute and at heart unshakable. And it can be dynamic and progressive. 

PCAF is the singular and extraordinary creation of Guidehouse, a globe-spanning environmental consulting firm. It began modestly in Holland – one of the most eco-friendly countries in the world  -- in 2015 and spread to banks across Europe. But its big expansion came in the last two years with the addition of the big American financial institutions and NatWest.

 It won’t just be large energy investments that will be subject to scrutiny and assessment by PCAF members. “It will extend all the way down to mortgages,” Jan-Willem Bode, a Guidehouse partner based in London, told me in a guest appearance on “White House Chronicle,” the weekly news and public affairs program on PBS.

Bode said the banks want to harmonize how they measure their carbon impact and work towards investments in everything from alternative energy projects, like wind farms, to solar homes that reduce the carbon load.

Bode insisted the commitment of the partners is real. They want a decarbonized future and will favor investments which bring that about. 

Of course, there will be critics aplenty. They’ll bandy about the pejorative “greenwashing” and will suggest that the companies that financed carbon production in the past are still at it. 

I think they haven’t got the message: America will be greened a lot faster when big money says “green.” 

Take what Citi’s CEO Michael Corbat said, “If there’s one lesson to be learned from the COVID-19 pandemic, it is that economic and physical health and resilience, our environment and our social stability are inextricably linked.” 

The greenback is getting greener. 

 

 

 

 

 

 

 

Discussions
Matt Chester's picture
Matt Chester on Aug 17, 2020

So complete has been the relationship between banking and energy that American Electric Power, once the nation’s biggest electric power company, had its headquarters on Wall Street for decades before moving it to Columbus, Ohio, where its customer base is. The Edison Electric Institute, now a fixture among the power players in Washington, was headquartered in New York City when I began writing about the utility industry in 1970. Likewise, the Atomic Industrial Forum, a forerunner of the Nuclear Energy Institute, moved to the Washington area.

Thanks for the history lesson, Llewellyn. This certainly tells a story!

I've been hearing a lot about the greening of banking and investments, but not as much in tangible actions that can/should be taken. Are there tools out there for individuals, for example, who may want to examine the relative carbon impact of their investment portfolio (mortgages, bank accounts, individual or group investments, etc) so they can do more?

Llewellyn King's picture
Thank Llewellyn for the Post!
Energy Central contributors share their experience and insights for the benefit of other Members (like you). Please show them your appreciation by leaving a comment, 'liking' this post, or following this Member.
More posts from this member

Get Published - Build a Following

The Energy Central Power Industry Network is based on one core idea - power industry professionals helping each other and advancing the industry by sharing and learning from each other.

If you have an experience or insight to share or have learned something from a conference or seminar, your peers and colleagues on Energy Central want to hear about it. It's also easy to share a link to an article you've liked or an industry resource that you think would be helpful.

                 Learn more about posting on Energy Central »