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Capital markets: The hidden pipeline for fossil fuel financing

“A new report – Capital markets: The hidden pipeline for fossil fuel financing by the Sierra Club’s Fossil-Free Finance campaign on the role of big US banks in capital markets reveals a hidden pipeline for fossil fuel financing through the banks’ underwriting of bonds and equities for polluting companies. The analysis raises important questions about how the 6 biggest US banks calculate and report on their facilitated emissions, and makes the case for the importance of banks’ capital markets activities in achieving real-world emissions reductions. The report comes ahead of the imminent release of an updated methodology on how banks can disclose and set targets for their facilitated emissions by the industry-led initiative Partnership for Carbon Accounting Financials (PCAF).  “The reality is, without banks, fossil fuel companies cannot raise money through capital markets. By downplaying their role in capital markets and refusing to include facilitated emissions in their climate targets, big US banks are intentionally sidestepping a major source of real-world emissions and making it impossible to meet their own net-zero commitments,” said Adele Shraiman, Senior Campaign Strategist with the Sierra Club’s Fossil-Free finance campaign. The analysis, which uses data from the annual Banking on Climate Chaos report, examines the capital markets activities of the 6 biggest US banks for 30 of the top fossil fuel expansion companies in the world. It reveals that from 2016-2022, nearly two thirds (61%) of the financing for fossil fuel expansion companies from JPMorgan Chase, Citi, Bank of America, Wells Fargo, Morgan Stanley, and Goldman Sachs was via capital markets, as opposed to direct lending. From 2016-2022, these six banks have underwritten $266 billion in new bond and equity issuances for top fossil fuel companies. JPMorgan Chase was the largest underwriter, providing $69.9 billion in underwriting of bonds and equities. Citi was the second largest underwriter.  The analysis also reveals the variations in the breakdown of banks’ lending versus underwriting activities from 2016-2022. Underwriting far outpaced lending for Morgan Stanley and Goldman Sachs; lending and underwriting were closer to equal for Bank of America, Citi, and JPMorgan Chase; and lending far outpaced underwriting for Wells Fargo.”

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