New York — JPMorgan Chase & Co. said that it is adopting a financing commitment that is aligned to the goals of the Paris Agreement (“Paris”). As part of its strategy, the Firm intends to help clients navigate the challenges and capitalize on the long-term economic and environmental benefits of transitioning to a low-carbon world.
“Climate change is a critical issue of our time. The goals set in the Paris Agreement are commendable and ambitious, but the world is not on track to meet them,” said Daniel Pinto, co-President of JPMorgan Chase and CEO of its Corporate & Investment Bank. “While the world has a long way to go, we at JPMorgan Chase want to do more. That means working with clients, policymakers, and advocates to transition our economy and turn the goals of Paris into a reality.”
The Climate Challenge
While a growing number of companies have been working to align their business strategies to the goals of the Paris Agreement, significant challenges exist. This includes a lack of comprehensive and high-quality greenhouse gas (“GHG”) emissions data, as well as the need for robust policy solutions and new technologies.
The International Energy Agency has noted that one-third of the emission reductions needed in its Paris-aligned Sustainable Development Scenario will have to come from technologies that are not yet commercially available. While the use of lower-carbon technology is growing within the electric power and automotive sectors, currently there are not adequate commercially available solutions to replace oil and natural gas in critical applications such as long-distance transportation and heavy industry. As a result, these resources will continue to play a significant role as sources of energy.
JPMorgan Chase plans to help tackle these challenges by working with clients in key sectors to align its financing activities with the goals of Paris.
A Commitment to Paris
The Paris Agreement aims to hold the increase in global average temperature to well below 2 degrees Celsius above pre-industrial levels, and ideally, to 1.5 degrees Celsius – which would require the world to achieve net-zero emissions by 2050.
As part of its commitment, JPMorgan Chase will establish intermediate emission targets for 2030 for its financing portfolio and begin communicating about its efforts in 2021. The Firm will focus on the oil and gas, electric power and automotive manufacturing sectors and set targets on a sector-by-sector basis.
Over time, JPMorgan Chase will aim to support companies to advance the goals of Paris, including reducing GHG emissions and expanding investment in low- and zero-carbon energy sources and technologies. The Firm recognizes that significant changes in policy and the creation of new technologies will ultimately be required to reach net-zero emissions by 2050, particularly in those industrialized sectors that today lack alternatives. To that end, JPMorgan Chase will continue to advocate for market-based policy solutions, including a price on carbon, and the commercialization of new technologies that can help advance deep decarbonization.
JPMorgan Chase plans to share more details in its next climate report, which will be informed by the recommendations of the Task Force on Climate-related Financial Disclosures (“TCFD”) and will be published in spring 2021. The Firm will also provide ongoing updates on its progress over time.
“With its ambitious new climate commitment, JPMorgan Chase & Co is positioning itself as a critical player in driving clean energy technology development and deployment. By aligning its financing with the Paris climate goals, the bank is sending a powerful signal that will help steer utilities, automakers, and oil and gas companies further along the path to decarbonization,” said Bob Perciasepe, President of the Center for Climate and Energy Solutions (C2ES). “Executing this new strategy will be no easy task. But as more and more companies step up to the challenge, it’s now up to our political leaders to enact the policies needed to get the job done.”
Center for Carbon Transition
The Firm is launching the Center for Carbon Transition (“CCT”) to provide clients in the Corporate & Investment Bank and Commercial Banking with centralized access to sustainability-focused financing, research and advisory solutions. The CCT will also engage clients on their long-term business strategies and related carbon disclosures. The group will be led by Rama Variankaval, a Managing Director and 18-year veteran of the Firm who also continues to lead J.P. Morgan’s Corporate Finance Advisory team.
“The transition to Paris-alignment will require big ideas, technology innovation and financing,” said Rama Variankaval, Head of the Center for Carbon Transition, JPMorgan Chase. “This group will enable us to leverage the best of our expertise and resources across the Firm to help all our clients thrive in a low-carbon future.”
Measurement and Industry Engagement
To help advance the transition to a low-carbon economy and track progress towards Paris, the Firm will aim to evaluate its clients’ carbon intensity, which tracks emissions relative to unit of output. When measured over time, carbon intensity provides insight into changes in efficiency and performance. The Firm is also exploring ways to most effectively address all emissions, including Scope 3 emissions, which are relevant for sectors where the majority of GHGs are generated at other points in the supply chain.
Additionally, the Firm will continue to engage with other stakeholders and clients on how to strengthen the comprehensiveness and quality of data reported, which remains a challenge, as well as advance policy solutions. As company disclosures improve, JPMorgan Chase remains committed to incorporating the best available information into decision making about its financing activities.
For example, earlier this year, the Firm became a Founding Partner of Rocky Mountain Institute’s Center for Climate-Aligned Finance, which is developing practical solutions for financial institutions seeking to pursue the goals of the Paris Agreement in relation to relevant business activities. In addition, JPMorgan Chase is a member of the Climate Leadership Council and Business Roundtable, the latter of which recently published a new set of principles to guide the development of effective climate policy.