The big four US banks have reported fourth quarter results that reveal just how difficult the economic environment is with hyperinflation, high interest rates and dire energy security. But they also show a failure by the banks to take advantage of a grinning gift horse.
It’s been five months since US Congress got the Inflation Reduction Act passed into law. It’s a game-changer for climate change because it incentivises the move to renewable energy by throwing hundreds of billions of dollars at funding, tax credits and subsidies at the sector.
It was the reason that Barclays in November announced it was winding down funding for coal in the US 5 years earlier than scheduled. The Inflation Reduction Act provides funding for renewables, making them cheaper and more attractive to finance, and also funds the retirement of coal plants.
But the US banks have so far failed to make a similar policy switch in favour of renewables which would allow them to tap the incentives that are available. In fact, they’re still stuck in the past, funding massive fossil fuel projects.
This is bad for the banks’ shareholders, customers and workers as the risky environment means lower returns, poorer service and loss of jobs. A sure bet with renewables, backed by federal government incentives would help counter this.
It’s also bad for the US taxpayer since these banks have a track record in seeking bailouts when times get tough. And with a potential recession looming this can’t be ruled out.
The banks’ refusal to take advantage of a switch to renewables is also dire for the planet. The American Meteorological Society this week showed how scientists are directly linking extreme weather events to the heating planet. These include mega-droughts, heatwaves and floods in the US and the country’s banks are behind the funding causing climate change.
JP Morgan Chase, Citi, Wells Fargo and Bank of America make up one quarter of the total global funding for the industry. Between 2016 and 2021 the banks pumped over US$1.2 trillion into the fossil fuel sector. Citi is the biggest funder of coal outside of the Chinese banks and is the biggest fossil fuel funder in Africa and the largest financial backer of state-run fossil fuels in the Amazon.
Given the risks involved at every level, it’s time for the US banks to just and take the money, something they’ve never been shy of before!