By Simon Jessop, Virginia Furness and Ross Kerber
BAKU (Reuters) – The United States’ biggest lender JPMorgan provided $1.29 in financing to green energy for every dollar backing high-carbon energy supply in 2023, executives told Reuters, the first time it has released the figure.
The decision by the bank – a major funder of traditional energy companies – to disclose an Energy Supply Financing Ratio followed engagement with New York City Comptroller Brad Lander, who oversees public pension money.
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Banks are increasingly under pressure from investors to show how they are helping clients in the transition to clean energy, and JPMorgan’s announcement comes as negotiators meet at a United Nations conference in Baku to discuss the move away from fossil fuels.
JPMorgan said its new measure, to be included in a report scheduled for release on Thursday, is meant to capture the energy mix of a company’s capital investments rather than its current asset base.
When calculating the ratio, JPMorgan considered its financing activities such as loans, debt underwriting, tax-oriented investments and green bonds, and classified these as either for high- or low-carbon energy.
For companies that do both, for example a power utility with both natural gas and renewable assets, the bank looked at forward-looking data such as the client’s capital expenditures to decide how to classify the financing, said Rama Variankaval, JPMorgan’s Global Head of Corporate Advisory.
JPMorgan has previously said it aims to finance $2.5 trillion in sustainable development by 2030, with $1 trillion of that focused on climate solutions.
JPMorgan’s lending to green energy had grown in recent years, amid a reduction in demand for external finance from cash-rich oil companies.
The ratio was affected by “the very deliberate strategy of JPMorgan to do more low-carbon financing and also partly because the oil and gas sector has come to the capital markets far less,” Variankaval said.
While it remains unclear whether U.S. companies will face a domestic rule on climate-related disclosures under the climate-sceptic government of incoming President Donald Trump, more banks are set to provide similar ratios in the future.
Despite not setting a target ratio, JPMorgan is “optimistic in the long-term outlook for low-carbon energy in the U.S. and, candidly, across the world”, said Global Head of Sustainability Heather Zichal.
“Our focus has been, and will continue to be, on scaling the technologies that the world needs, and supporting our clients in every sector as they are adapting to a rapidly changing economy,” Zichal said.
(Editing by Stephen Coates)
