JPMorgan Chase Commits to World's Dirtiest Fuel: Investors Ask Why?

JPMorgan Chase (JPM) has positioned itself as an industry leader on climate change. CEO Jamie Dimon voiced strong, public opposition to President Trump’s plan to withdraw from the Paris Climate Agreement. The bank also plans to use renewable power for 100 percent of its global energy use by 2020 and has committed to facilitate $200 billion in clean energy financing through 2025 - the largest pledge in the financial sector. Further, it plans to reduce loans for coal mining and restrict financing for coal power.

So why is the bank increasing its financing for tar sands oil extraction?

Tar sands oil is one of the dirtiest and most carbon-intensive fossil fuels. It has much higher greenhouse gas emissions than conventional oil production and is one of the highest CO2 emitting sources of oil in the world on a per-barrel basis. The huge upfront capital expenditures its exploitation requires threaten to lock in intense carbon pollution for decades. Extraction destroys forests, pollutes land and water, and creates massive reservoirs of toxic waste. It impacts indigenous peoples’ rights both at the point of extraction and along pipeline routes, through serial failures to secure free, prior and informed community consent.

JPM is the biggest U.S. lender and underwriter of tar sands producers and pipeline companies, with $8.4 billion in loans from 2014 through September 2017. This is more than double the sum from its nearest U.S. peer. In the first nine months of 2017, JPM’s financing of tar sands increased almost 17 percent compared to all of 2016.

In contrast, here is how major energy and financial companies reacted to tar sands risks in 2017.

ExxonMobil wrote off 3.5 billion barrels of tar sands oil reserves as not economically viable.
ConocoPhillips, Marathon Petroleum, Shell, Murphy Oil and Statoil sold more than $24 billion of tar sands assets.
Suncor, the largest tar sands producer, “pledged not to invest in oil sands for ‘foreseeable future’ and shares have surged,” according to the The Wall Street Journal.
French insurance giant AXA Group announced it was ending investments in 25 tar sands companies and three major pipelines, and withdrew insurance coverage worth €700 million from pipeline companies.
BNP Paribas, the world’s 8th largest bank, announced it “will no longer do business with companies whose principal business activity is the exploration, production, distribution, marketing or trading” of tar sands oil and will restrict financing for related projects.
Eight other global banks have developed similar policies.

JPM is compounding the reputational and financial risk it faces by supporting four new controversial planned tar sands projects, via project or corporate financing: Kinder Morgan’s Trans Mountain, TransCanada’s Keystone XL, Enbridge’s Line 3 pipelines and Teck’s Frontier mine. All would result in significant climate and environmental impacts; affected indigenous communities strongly oppose each project. Tar sands development lost nearly $31 billion in revenue from 2010 through 2013, because of the plummeting price of oil that occurred alongside fierce grassroots opposition to tar sands development. These projects, like those before them, face the possibility of becoming stranded assets.

A shareholder resolution, led by Proxy Impact, asks JPM to report on the risks related to its financing of tar sands production and transportation. In an effort to block the proposal at the SEC, JPM asserts its lending for tar sands is just an ordinary business matter, And that, of course, is the problem - because there should nothing ordinary about violating indigenous rights and increasing financing for the world’s dirtiest fuel.

Michael Passoff

Founder and CEO, Proxy Impact