San Fransisco, Jan 21 2011
Today Rainforest Action Network (RAN) released, 'The
Principle Matter; Banks, Climate and The Carbon Principles', a new report
assessing the impact of the much-lauded 2008 Carbon Principles signed by six of the
country's leading banks. In reviewing bank investment from January 2008 to June
of 2010, the report found that there is no evidence that the Carbon Principles
stopped or slowed financing to carbon-intensive projects. In addition, the
report found that there is no evidence that the Carbon Principles spurred
investment in clean energy in greater levels.
Three leading banks, Citi, JPMorgan Chase and Morgan
Stanley announced the Carbon Principles in February 2008. The Carbon
Principles were the outcome of a nine-month bank led process to evaluate and
address carbon risks in the financing of electric power projects in the United States.
The Carbon Principles represent the first time that financial institutions
jointly committed to advance a consistent approach to the issue of climate
change in the U.S.
electric power industry. Since the Principles were released, Wells Fargo, Bank of
America and Credit Suisse have subsequently become signatories.
The Carbon Principles were a significant step in
establishing carbon risk as important for banks to consider. Based on the
serious threat posed by global climate change, however, it is time leading
financial institutions develop a more robust framework of policies and
practices that concretely reduce emissions from electric power," said
Amanda Starbuck of Rainforest Action Network. When the Carbon Principles were
created, they were one of the first industry-wide statements from the banking
sector specifically addressing climate change and carbon-intensive investments.
The Principles were designed to address the risks associated with regulatory
uncertainty of carbon emissions, and were also a direct response to growing
public concern over plans for more than one hundred new coal-fired power
RAN's report compared the financing of major utilities
building new coal fired power plants over a two year period and found that
there was no discernable difference in financing patterns between banks that
signed on to the Carbon Principles and those that did not. The report did find
that the Carbon Principles placed stricter due diligence conditions on banks
for financing the construction of new coal fired power plants in the United States.
"In short, have the Carbon Principles restricted financing to coal-fired power
plants or encouraged greater levels of clean energy investments? Sadly, the
answer is no," continued Starbuck. "Our research reveals that, while
the broader economy has been shifting away from coal for myriad reasons, if the
Carbon Principle banks want to take leadership in addressing coal and climate
change in the financial sector they must do more."
As a case study, RAN's report reviewed the financing of
two American Municipal Power (formerly AMP-Ohio) coal-fired power plants, which
were both funded by banks that signed on to the Carbon Principles. Needing to
secure nearly $4 billion from a bond placement for one of the plants, AMP
contacted JPMorgan in early 2008 with concerns regarding how the Carbon
Principles might affect the company's ability to raise capital. On February 7,
2008, a response from JPMorgan, which was leaked to the press, assured AMP that
"[n]othing in the Principles prevents us from underwriting debt or
providing financing for AMP- Ohio's projects or is intended to do so."
The RAN report recommends that leading financial
institutions develop a more robust framework of policies and practices to
address climate risk, which would include:
- Performance, not just procedural, standards for
financial transactions and client engagement
- Phase out support for new and existing
coal-fired power plants
- Phase out support for new and existing coal
extraction and delivery projects
- A commitment to dramatically increase support
for financing emissions reduction technology, renewable energy production and
energy efficiency in all business lines
In compiling this review, RAN compared Carbon Principles
with non-Carbon Principles bank underwriting in the U.S. electricity sector; reviewed
signatory bank reporting of Carbon Principles implementation; interviewed bank
and civil society participants in the Carbon Principles process; and examined
alternative policy frameworks.