The temperature in parts of the Antarctic was seventy degrees Fahrenheit above normal in mid-March. Pakistan and India saw their hottest March and April in more than half a century, and the temperature in areas of the subcontinent is above a hundred and twenty degrees this week. Temperatures in Chicago last week topped those in Death Valley. But, on Tuesday, three nonprofit environmental groups jointly released a report containing a different set of numbers that appear to be nearly as scary. They indicate that the world’s biggest companies—and, indeed, any company or individual with cash in the bank—have been inadvertently fuelling the climate crisis. Such cash, left in banks and other financial institutions that lend to the fossil-fuel industry, builds pipelines and funds oil exploration and, in the process, produces truly immense amounts of carbon. The report raises deep questions about the sanity of our financial system, but it also suggests a potential realignment of corporate players that could move decisively to change the balance of power which has so far thwarted rapid climate action.
To grasp the implications of the new numbers, consider Google’s parent company, Alphabet. It has worked hard to rein in the emissions from its products. Last year, for example, Google Sustainability published an account of the work it put into having casing suppliers convert from using virgin to recycled aluminum for Google’s new Pixel 5 phone, an immense effort involving everyone from the metallurgy team—which, the company said, “studied the chemical compositions of different recycled aluminum alloys and grades, looking for an optimal combination of alloying elements to meet our performance standards”—to executives who had “to go far upstream in the supply chain to the source that was supplying our aluminum, then negotiate a new type of deal that they’d never done before.” All this was done, Google said, in order to “lower the carbon footprint of manufacturing the enclosure by 35 percent.” It’s the kind of grinding work that goes on day after day at companies that take the climate crisis seriously.
But, according to the new report, these efforts have missed perhaps the most important source of corporate emissions: the money that these companies earn and then store in banks, equities, and bonds. The consortium of environmental groups—the Climate Safe Lending Network, the Outdoor Policy Outfit, and BankFWD—examined corporate financial statements to find out how much cash the world’s biggest companies had on hand, and then calculated how much carbon each dollar sitting in the financial system may have generated. According to these calculations, Google’s carbon emissions, in effect, would have risen a hundred and eleven per cent overnight. Meta’s emissions would have increased by a hundred and twelve per cent, and Apple’s by sixty-four per cent. For Microsoft in 2021, the report claims, “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.” Amazon, too, has worked to cut emissions; it plans to run its delivery fleet on electric trucks, for instance. But in 2020, the report claims, its “$81 billion in cash and financial investments still generated more carbon emissions than emissions generated by the energy Amazon purchased to power all their facilities across the world—its fulfillment centers, data centers, physical stores.” Also according to the report, in 2021, the annual emissions from Netflix’s cash would have been ten times larger than what was produced by everyone in the world streaming their programming—which is to say, Netflix and heat.
The authors are quick to note caveats. The companies mentioned do not disclose banking arrangements; some of their cash is in the major banks, but some of it is reportedly held overseas, and a portion is in sovereign debt, such as Treasury bills, or in other assets that can be quickly sold, such as stocks. So the numbers, though precise, are extrapolations based on averages and emissions estimates. The report is based on research and analysis performed by South Pole, an international climate-finance consultancy that has worked with companies such as Nestle and Hilton on emissions reporting. South Pole maintains that “the carbon intensity figures for the asset classes analyzed in this report are conservative estimates that constitute an indicative underestimation of the actual emissions banks generate through their financial services”—and that, if you added in companies’ pension plans and insurance arrangements, it would “generate a larger financial footprint calculation than simply cash and investments.” Even if these figures are crude-cut, however, they are the first of their kind that we have seen and, as such, they offer a unique analysis.
Since the global-warming alarm was first publicly sounded, in the late nineteen-eighties, activists have pushed countries and companies to catalogue their emissions. Beginning in 2001, companies that want to pay attention to their progress—which includes the companies mentioned in the new report—have used a set of “greenhouse-gas protocols” which are overseen by the World Resources Institute, a global nonprofit organization. Under the protocols, a business can report its Scope 1, Scope 2, and Scope 3 emissions. Scope 1 includes direct emissions from operations that a company controls or owns: a factory’s boilers; a delivery fleet’s gas tanks. Scope 2 emissions come from energy purchased by a company, such as those that a local utility produces when generating power for the company. And Scope 3 emissions are the indirect emissions that “occur in a company’s value chain,” such as, for example, the carbon produced by the companies that make the aluminum casings for Google’s phones.
Scope 3 emissions could also include downstream, indirect emissions—such as those produced by a company’s cash held in banks. In the official accounting framework that the World Resources Institute has provided to companies since the launch of its emissions protocols, there has been a space for carbon emissions that come from cash on hand—category 15, under Scope 3. But in the past most non-financial companies have left it blank, because there’s never been a good method for calculating those emissions. “There’s nothing more core to a business than making money—it’s the thing they exist to do,” Paul Moinester, the executive director of the Outdoor Policy Outfit, a think tank, said. “So the fact that we couldn’t incorporate the role that their money plays into their carbon emissions—there’s nothing more material than that.” Vanessa Fajans-Turner, who has announced a congressional run in upstate New York, is the executive director of BankFWD, which members of the Rockefeller family founded in part to track the carbon emissions of the financial system. She noted, “This is part of a company’s supply chain. They need to source financial resources and products. They need loans, they need places to keep their cash, they need interest rates, they need international transfers. These are things they source through a partner. That’s the definition of a supply chain.”
The effort to develop the new calculations began with conversations between James Vaccaro, a former European banker who heads the Climate Safe Lending Network, and Moinester. “We started to do some back-of-the-envelope calculations about how much carbon their cash was producing,” Vaccaro explained to me. “And we were, like, ‘This has to be wrong. Surely we’ve transposed a decimal place. This has to be an order of magnitude too large.’ ” The biggest banks, especially in the U.S., supply huge amounts of capital to keep the fossil-fuel industry expanding. According to Banking on Climate Chaos, an annual report from the Rainforest Action Network and other environmental organizations, JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo have together disbursed more than a trillion dollars to the industry in the years since the Paris climate accord was adopted, in December, 2015. This includes to companies developing new projects that scientists, Indigenous leaders, and climate activists have decried, from the Keystone and Dakota Access Pipelines and new fracking fields to drilling in areas of the newly melted Arctic.
The environmental groups point out that the companies singled out in the report shouldn’t be embarrassed by the numbers, which are not exactly their fault. Instead, they say, the numbers should empower them—and any other operation or individual who’s making money and storing it in the U.S. financial system—to insist that banks stop lending money to finance the expansion of the fossil-fuel system. And, if they leaned on them as effectively as they do on, say, aluminum suppliers, the results could be remarkable. Google, for instance, is one of the world’s largest purchasers of renewable energy. But, the report states, if it could reduce its “financial footprint by 43%, the emissions reduction would be equivalent to the carbon savings Alphabet has generated” with all that solar and wind power. And maybe it will—after all, when Google did the work on its aluminum casings, the company noted that its suppliers had agreed to make the recycled aluminum “available to the consumer electronics industry as a whole,” because “it’s a core Google principle to try to lift all boats.”