The Big Tech companies — Google/Alphabet, Apple, Microsoft, and Amazon being just a few — all emphasize sustainability and tout their efforts to reduce their carbon footprint. They insist on using renewable energy to operate their vast networks of servers. And yet, according to a new report, they may unwittingly be providing the money fossil fuel companies need to continue raping and pillaging the Earth to get at coal, oil, and methane deposits.
How is that possible? The answer can be found in the world of banking. Once a person or a corporation deposits money or other valuable financial products with a bank, it uses them to loan money to others. The $500 you have in a savings account may not be a big deal, but corporations deposit hundreds of billions, which is a big deal.
Banks make loans. It’s what they do. And they don’t ask you — or their corporate clients — what sorts of loans they are permitted to make. Instead, they seek the highest rate of return they can find. Since fossil fuel companies are willing to pay high interest rates on the money they borrow to finance their operations, many banks actually prefer to loan money to them because that means they earn more money, which means fat year end bonuses for those at the top of the food chain.
Here’s the introduction to the new report in its entirety. It makes for interesting reading.
In response to the climate crisis, the world’s most responsible companies are doubling down on their efforts to combat climate change. From utilizing 100% renewable energy to electrifying fleets toinvesting in carbon removal technologies, the growing toolbox of climate solutions companies to employ to decarbonize their direct and supply chain emissions is becoming systemic and effective. However, one source of corporate supply chain emissions has long existed beneath the radar because it has been difficult to analyze: the climate impact of companies’ banking practices. Even for corporations with billions of dollars in cash and investments, it has not been possible to calculate the greenhouse gas emissions generated by their corporate cash and investments.
New research by the Climate Safe Lending Network, The Outdoor Policy Outfit, and BankFWD makes it possible to calculate the emissions generated by a company’s cash and investments (cash, cash equivalents, and marketable securities). This research illuminates that this previously hidden emissions source is substantial. For some of the world’s largest companies, including Alphabet, Meta, Microsoft, and Salesforce, their cash and investments are their largest source of emissions. In fact, for Alphabet, Meta, and PayPal, the emissions generated by their cash and investments (financed emissions) exceed all their other emissions combined.
That means for a company like Microsoft, in 2021 the emissions generated by the company’s $130 billion in cash and investments were comparable to the cumulative emissions generated by the manufacturing, transporting, and use of every Microsoft product in the world. For companies like Amazon and Johnson & Johnson, whose operations are more carbon intensive, their financed emissions still increase overall emissions by up to 15%.
In 2020, Amazon experienced record sales and emissions due to the COVID-19 pandemic. However, in 2021, its $81 billion in cash and financial investments still generated more carbon emissions than the emissions generated by the energy Amazon purchased to power all their facilities across the world — its fulfillment centers, data centers, physical stores, and other facilities.
Following the release of the latest IPCC 6 climate report, UN Secretary General António Gutteres said it showed a “criminal abdication of leadership.” Since then, according to The New Yorker, 7 huge new oil and gas projects were approved around the world, enterprises now referred to as “carbon bombs.” Exxon, which claims its carbon lies are protected free speech, has announced a new offshore drilling project in Guyana. Canada has approved 60 new wells to be drilled in the Flemish Pass near Newfoundland. The lead company on that project, Equinor, banks with Chase and Bank of America.
These projects will generate emissions long past the point by which scientists say we must be done with fossil fuels. “We’re locking in decades of emissions every day as a result of banks not moving fast enough,” says former European banker Paul Moinester. The New Yorker suggests that over the next year or two, we are going to find out whether modern mega-scale capitalism can still play a part in helping us out of the “gravest dilemma that our species has ever faced.”
For Big Tech, Size Matters
Let’s face it. Ever since the disastrous Citizens United decision by the US Supreme Court, corporations have replaced people as the holders of sovereign power in America. And yet as a group, with the exception of Koch Industries, they have declined to use their power to directly engage in setting social policy. Sure, they make campaign contributions and they work to lower the carbon emissions associated directly with their business activities, but they have not worked together to offset the power of the banks and the fossil fuel industry.
The New Yorker says part of the reason is that size matters. They may be big, but Saudi Arabia’s Aramco has the highest market capitalization of any corporation in the world. Exxon is 15th and Chevron 22nd. Chase is number 18 and Bank of America is 28th. Therefore, if forced to make a choice, a banker might well decide to lend to Big Oil rather than to a tech company.
On the other hand, among Big Tech companies, Meta (the company formerly known as Facebook) is No. 8, Tesla is No. 6, Amazon is No. 5, Alphabet is No. 4, Microsoft, No. 3, and Apple, No. 2. All these companies have net-zero targets. The New Yorker says, “If they decided to pressure the banks, it would be a battle of giants. And the banks would have to consider not only who’s on top now but who’s likely to stay there. It’s pretty hard at present to make a case for Exxon’s long term future, though Amazon seems likely to last. If Apple CEO Tim Cook sits down with Chase CEO Jamie Dimon, who blinks first?”
What is needed is not for the banking industry to make pretty speeches about lowering the carbon intensity of its operations but rather to stop financing future fossil fuel adventures. Jason Disterhoft, a senior climate and energy campaigner for the Rainforest Action Network, told the New Yorker, “No opening new oil and gas reserves for extraction, no exploring for new oil and gas reserves, no new or expanded pipelines, LNG terminals or other midstream infrastructure, and no new or expanded gas-fired power, refineries or other downstream infrastructure. ” All this at a time when the US is pressuring Europe to build new LNG terminals to offset its reliance on Russian gas.
Big Tech & The Future Of Capitalism
In the future, capitalism can either be a suicide machine or play a crucial role in speeding up the clean energy revolution. The New Yorker says big banks and asset managers are the capital in capitalism. They know how to take money that you deposit today and turn it into 20-year loans to pay for a piece of infrastructure designed to last 40 years. “It transforms the short term into things that are going to be around for decades,” said James Vaccaro, a former banker and current head of the Climate Safe Lending Network.
It’s a system that helps innovation flourish, the New Yorker says. “Without it, we would not have seen the price of renewable energy plummet, as one company after another raised capital to work on the next iteration of wind turbines or batteries. But so far it refuses to discriminate between useful work and work that literally imperils the planet — and, if you want to think in those terms, all the economic activity that might someday take place on that planet, assuming that it survives in some recognizable form .”
According to Rockefeller heir and BankFWD co-founder Peter Case, “The financial system can be one of two things — a driver of sustainable growth or a driver of climate chaos.” The New Yorker puts a fine point on things. “If Big Tech pushes Big Money to cut off Big Oil, we could see the shifts that have eluded us in the climate fight thus far, and that scientists insist we need to make. It could be a true turning point in the crisis.” Carbon capture? Geo-engineering? Pish tosh. Responsible investment strategies could do more than those cockamamie schemes.
Our readers are encouraged to read the entire New Yorker article. It is chock full of interesting details and insights but its paragraph final puts precisely things.
“As with any truly self-destructive behavior, an intervention is required. That is why the possibility of some of these big players performing that intervention with the banks seems so necessary. In a world of widening inequality, companies such as Apple or Amazon have emerged as almost cartoonishly rich and hence uniquely powerful in their ability to force change. We’re down to the last years when humans will have the leverage to really affect where the planet’s temperature settles. 2030 is just seven years and seven months away. Or, as they measure time at Google and Chase, thirty-one quarters.”
It’s time to acknowledge that corporations are now super-citizens whose wealth, power, and influence exceed those of mere mortals. To date, most of them have preferred to keep their heads down and make money. But the key to business is customers with money to spend. It seems incredibly shortsighted to ignore the fact that an overheating planet may well reduce their customer base substantially. Dead people don’t buy stuff, a key consideration that most corporations overlook because they are incapable of thinking beyond the next quarter of the next annual report.
Conventional business theory posits that corporations have only one duty — create shareholder value. If the world of commerce continues to exclude moral imperatives, that in and of itself may result in humanity being ejected from this tiny little blue lifeboat at the far edge of our galaxy.
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