Banks can't measure climate risk? I live it every day.
June 7, 2024
by Roishetta Ozane
In April, a tornado ripped through the offices of a community organization I founded back in 2020, tearing the roof off and destroying a place which has been a sanctuary to many in the Lake Charles area of Louisiana. Low-income folks facing hardship, often from Black and brown backgrounds, were able to turn to the Vessel Project for food and financial assistance. Many found their way to our door because of extreme weather events, such as the hurricanes that devastated the area four years ago, with some folks still displaced and living in federal emergency trailers.
The risks of climate change and our exposure to the fossil fuel industry are visceral for many people in the U.S. right now. We are living it every day, through the broken homes and livelihoods we are trying to pick up, and for those burying loved ones killed in tornados, floods and wildfires.
For this reason I was utterly struck when I came across reports of a Federal Reserve analysis on how the six big banks responded to its request to measure their exposure to extreme weather and climate change. The banks — JPMorgan Chase, Citi, Bank of America, Wells Fargo, Goldman Sachs and Morgan Stanley — reported that they weren't able to carry out this task properly because, well, it was just too hard. Alarmingly, the Fed seems to have accepted this "dog ate my data" excuse and stated in its report that climate risks are "highly uncertain and challenging to measure."
It must be nice to not know what the risks of climate change are, and clearly if you're the CEO of a Wall Street bank or the chairman of the Federal Reserve you get to live in an ivory tower far from the danger and despair. But my community and I don't have that luxury, nor do millions of people across the U.S.
The folks my organization supports in fact face so much risk it's difficult to know where to start. Their homes and livelihoods are being destroyed by extreme weather, and at the same time they live in an area where the air and water is polluted because they are surrounded by the very industries causing the wider problem.
If they try to get insurance for their homes, cars or businesses, the premiums are either skyrocketing or they are told the risk is just too great and that they can't get coverage. Now hundreds of people we help at the Vessel Project are being dislocated by the devastation of our offices at the hands of the latest extreme weather event. We still help folks but have to move our assistance and community meetings to different locations while we try to rebuild. It saddens me to think some folks won't get the help they need because of the disruption.
Despite this there has been a glimmer of hope, not from any homegrown institution but from across the water: Two major European banks, Crédit Agricole and BNP Paribas, have changed their policies so that they will no longer be involved in bond deals on new oil-and-gas projects. This is good news because it recognizes the harm that is being caused to communities across the Gulf South, like those in Lake Charles which have to live next to toxic industries. It also recognizes the risk of pouring money into sectors that the world is trying to phase out.
In addition to the move by Crédit Agricole and BNP, in February U.K. bank Barclays announced it will no longer fund new oil-and-gas projects directly or, as of January 2025, clients which are wholly dependent on oil and gas. This follows a similar move by HSBC and an announcement by Danske Bank that it would stop financing oil-and-gas expansion.
But while European banks and their regulators are beginning to react to the risk crisis, U.S. banks and regulators are ignoring the alarm bells.
U.S. banks are doubling down with their friends in the fossil fuel lobby and its political operatives by backtracking on already piecemeal progress. Bank of America lifted bans on funding for coal projects and Arctic drilling while JPMorgan Chase has changed the way it calculates targets on its financed emissions, no doubt in an attempt to mask its lack of progress. Meanwhile, Citi continues to fund methane gas projects along the Gulf South which are opposed by communities because they are making their kids sick.
U.S. banking regulators are letting American families down badly by acknowledging that climate is a risk but refusing to do much about it. The banks continue to do what banks do and when the risks eventually catch up with them, they will again cry to the taxpayers that they need a bailout.
Questions must be asked as to who exactly a system like this serves, because it is certainly not meeting the needs of communities like mine or those affected by extreme weather.