There’s a hidden, huge source of emissions companies are ignoring: their banking
Companies like Microsoft, Alphabet, and Meta have invested heavily in renewable energy and other ways to shrink their corporate carbon footprints. But the biggest part of their emissions, according to a new report, comes from their banking—and it’s an area that has so far slipped under the radar.
Microsoft, for example, had $130 billion in cash and investments last year. The report, The Carbon Bankroll: The Climate Impact and Untapped Power of Corporate Cash, published by a banking collaborative and climate nonprofits, estimates that the emissions from the company’s banking are comparable to all of its emissions from making, transporting, and using its products, based on data about how much banks invest in fossil fuels and other carbon-intensive industries. (Microsoft declined a request to comment.) For a company like Paypal, the carbon footprint from its banking in 2021 was 55 times higher than all of its other emissions combined. For Amazon, which has a bigger carbon footprint from its operations, financed emissions add 15% to the company’s total.
“Banks are primary investors in the economy, and they’re lending into new businesses and new infrastructure, which is going to be around for years and shape the economy for decades to come,” says James Vaccaro, executive director of the Climate Safe Lending Network, a global collaborative of banks, nonprofits, academics, investors, businesses, and policy experts, which partnered with the nonprofits The Outdoor Policy Outfit and BankFWD to put together the report. Last year, for example, the 60 largest banks invested $742 billion in fossil fuels, at the same time that the International Energy Agency (IEA) said that new oil and gas investments need to end for the world to have a chance of meeting global climate goals. More money also needs to flow to climate solutions.
While shareholders have been pressuring banks to take climate action—including votes on resolutions to end new fossil financing, which gained more support this year than ever before—progress has been slow. But companies with huge amounts of cash can influence banks directly by deciding to move to climate-conscious institutions or asking their current banks to change. “To get a customer demand signal like this from these global companies that this is something they do care about, that’s going to be really powerful,” Vaccaro says, “and be able to unlock some of that talent and creativity within the financial system to be able to go full charge in helping design some solutions.”
Corporate sustainability directors haven’t been focused on their financial footprints, Vaccaro says, and when the researchers have talked to companies, “many of them were not even conceiving of the financial supply chain as a supply chain.” The Greenhouse Gas Protocol, a global system that companies use to report emissions, does call for this type of accounting, but companies haven’t been able to do it in the past because of a lack of data from banks.
More data will soon be available as many large banks have committed to disclose their emissions through the Partnership for Carbon Accounting Financials, and are working on that research now, Vaccaro says. To compile this report, the researchers relied in part on estimates from an organization called South Pole that calculated emissions from the largest U.S. banks, and companies’ cash holdings and other investments; though the numbers are rough estimates that just give a sense of the scale of these emissions.
Companies that were early to pioneer new ways to procure renewable energy might also now be first to start asking their banks to change policy. “I think that the major paradigm shift is that people have woken up to that finance is absolutely not neutral,” says Vaccaro. “And it’s a pivotal factor in being able to drive the [climate] transition.”
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