JPMorgan Sets Emissions Intensity Targets for Certain Clients Starting off with Oil & Gas, Electric Power & Auto Manufacturing A First for a Financial Institution and We May See More
TD Investment Conclusion
JPMorgan sets 2030 emissions intensity targets for three portfolios: JPMorgan
Chase (JPM-N, Not Rated) announced the following targets to help align its financing
activities with the climate goals of the Paris Agreement (link). Note these are 2030
targets from a 2019 baseline (Exhibit 1).
35% reduction for oil & gas: This is in reference to operational carbon intensity
(Scope 1 & 2); there is also a 15% reduction target for end-use carbon intensity.
(Scope 3) The target covers producers, refiners, and integrated companies. JPM
hopes to help clients address methane leakage and flaring activity, in addition to
encouraging shifts to renewable electricity to reduce operational emissions.
69% reduction for electric power generation (Scope 1): JPM hopes to help
clients accelerate the shift to low- and zero-carbon sources.
41% reduction for auto manufacturing of new vehicles and tailpipe emissions
(Scope 1 & 2 & 3). This target covers global manufacturers of light duty vehicles,
such as global passenger cars and U.S. light trucks. JPM will work with clients
to help accelerate the transition to electric vehicles, and over time, quantify and
address emissions from the automotive supply chain.
Considering other sectors: JPM is evaluating setting targets for other sectors
specifically Aviation and Pulp & Paper by YE22.
Why it matters: JPM is known to be one of the largest financiers of fossil fuels
globally. We continue to see an overemphasis on the upstream/supply side of the
emissions debate (vs. the end-consumer where the majority of emissions occur) and
are encouraged that JPM has also set targets for power generation and automakers.
These two sectors represent ~18% and ~12% of global emissions, respectively. To
our knowledge, this is the first time a bank has set emissions intensity targets for
its clients in an effort to help clients transition to a low-carbon world. We may see
similar moves by other financial institutions.
Access to capital continues to be a major theme for emissions intensive
industries: As we have previously noted (here), more financial institutions are
evaluating their financing activities in the context of their own climate change
pledges. As a result, we believe access to capital for emissions-intensive industries
may becoming more costly or challenging, and they will continue to face increasing
pressure to establish emission reduction goals that are in line with providers of
capital. On the other hand, companies that are proactive can work with financial
institutions to structure climate and ESG-aligned capital solutions (see our note on
Sustainability Linked Loans here).