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JPMorgan Chase & Co (NYSE:JPM) is urging clients in the oil and gas, electric power, and automotive sectors to align with the Paris agreement in an effort to tackle climate change, reports the Financial Times.
The bank is the largest lender to the fossil fuel industry, and it could realign its financing strategies and reduce exposure in entities where operations are not in sync with the global net-zero emission 2050 targets.
In the past, JPMorgan has received a lot of flak from climate activists for backing fossil fuel companies. Earlier this year, the bank declared that it would stop handing out direct loans for fossil fuel extraction in the Arctic, and would phase out existing loans by 2024.
What Happened: According to the Wall Street Journal, JPMorgan has a $40 billion loan exposure in oil and gas companies. The report also mentions that the bank could shift its focus to automotive manufacturing, electricity generation, and clean energy projects.
JPMorgan plans to use quantitative parameters, like carbon intensity metrics, to gauge emissions as a measure of output and release preliminary targets for 2030 by next year.
It has also disclosed the launch of the Center for Carbon Transition to offer advisory solutions on sustainability-focused financing.
Why Does It Matter: Many financial entities are backing efforts to cut carbon footprint.
In 2019, 38 banks agreed to a Climate Action Pledge, with the intent to limit global warming and achieve climate neutrality. BNP Paribas (OTC:BNPQY), Standard Chartered Bank (OTC:SCBFY), Societe Generale SA (OTC:SCGLY), and Natwest Group Plc (NYSE:NWG) are some of the signatories to the pledge.
Price Action: JPM shares fell 1.03% to close at $98.02 on Tuesday.
