By Shawna Ambrose

Rainforest Action Network (RAN) Voices Support for Majority Action’s Exempt Solicitation Filing to Remove Clayton Rose, the Chair of Bank of America’s Enterprise Risk Committee and Responds to Bank of America’s 2024 Annual Proxy Report

2023 was the hottest year on record, and last year, world nations reached a landmark agreement to “transition global energy systems away from fossil fuels” but instead of strengthening its positions and policies to reflect the scope and severity of the climate crisis and international resolve to act on it, Bank of America is backtracking on longstanding, as well as recently committed to, climate and human rights policies and safeguards.

At Bank of America’s annual shareholder meeting on April 24th, shareholders have the opportunity to demand accountability from how the bank, which is the world’s 4th largest cumulative financier of fossil fuels, is acting to address mounting climate risks to our global financial system.  Shareholders have an opportunity to vote in favor of two resolutions that call on the bank to improve the level of transparency communicated to shareholders and investors around the bank’s lobbying activities (proposal #6) and the bank’s relative levels of financing to clean versus fossil energy activities (proposal #7). Shareholders will also have the option to vote to remove Clayton Rose, Bank of America’s Risk Committee Chair, following an exempt solicitation filed by Majority Action today. All three shareholder actions carry significant climate implications.

Since the beginning of the year, Bank of America has removed explicit bans on financing coal and Arctic drilling projects (weakening its own policies put in place just two years ago). It has also withdrawn from the Equator Principles which apply fundamental environmental and human rights standards to financing granted for projects around the world. Bank of America is also the only major global bank to approve financing for Australia’s Whitehaven coal company to acquire two mines for metallurgical coal extraction.

Now Bank of America is unwilling to publish its own financing ratios for how much money it is funneling towards fossil fuel versus clean energy activities or even provide fuller disclosure around its lobbying activity. The bank issued its proxy report on Monday March 11th laying out its reasons for why shareholders should vote against these two climate-relevant resolutions. The Bank’s main defense boils down to a claim that they are either already providing information called for in the resolutions or that that information can already be sourced from third parties. Both these assertions dismiss the desire being voiced by major investors for even greater levels of transparency.

Providing transparency on clean energy financing ratios is a basic pillar of the bank’s fiduciary responsibility to its shareholders and investors. An institution’s financing ratio serves as a clear indicator of its funding priorities and how the ratio changes year-on-year illustrates the credibility of its transition plan for reaching net zero targets.

Bank of America’s argument that the analysis of third party data firms (like BNEF) negates the need for the Bank to perform and share its own internal accounting is akin to saying “Why bother doing our own homework when we can just copy off someone else?” Bank of America’s argument is also undermined by the actions of its peers; both JPMorgan Chase and Citigroup have agreed to publish their respective financing ratios. In addition to being negligent, Bank of America’s claim that publishing its own financing ratio would be redundant is designed to keep prying eyes away from its books and suggest that third party estimates are complete and sufficient even when the authors of those estimates explicitly cite data access issues as key limitations of their models. When combined with the Bank’s walk back of foundational environmental and human rights standards, the Bank’s approach highlights severe deficits in risk management that far from being merely missteps are unmistakable indicators of a misguided course.

Shareholders, as guardians of the bank’s direction, must signal their disapproval of current risk stewardship and demand accountability by voting to remove Clayton Rose, the Chair of the Enterprise Risk Committee. It’s time for a reset, with leadership that recognizes the integral role of sustainability and transparency in the bank’s long-term success and its responsibilities to the planet and its people.

Fact-Checking Proxy Report Claims On Proposal #7 (Shareholder proposal requesting disclosure of clean energy financing ratio):

The New York City Employees’ Retirement System (comprised of the NYC Comptroller’s Office and the NYC/NYS pension funds) introduced the same resolution at six major US and Canadian banks requesting a transparency measure for the bank to disclose its relative levels of financing to clean versus fossil energy activities. They released their own arguments in favor of proposal 7 in the form of 10 reasons to vote for the proposal.

Financial experts at BloombergNEF modeled that financing for clean energy must outpace financing for carbon intensive energy by a factor of 4:1 this decade, increasing to 6:1 or 7:1 by the end of the decade if the world is going to meet its goal of slashing global emissions in half by 2030. BNEF developed the methodology to calculate a Low-carbon to Fossil Fuel Energy Supply Investment Ratio (ESIR) and a Low-carbon to Fossil Fuel Energy Supply Banking Ratio (ESBR) for both individual financial institutions and averaged across the banking and investment sectors.

Bank of America is the world’s 4th largest cumulative financier of fossil fuels, having pumped $280B into fossil fuels since 2016 and approximately $35.4B in 2022 alone. The Bank has also made a pledge to increase its financing for clean energy to $1T by 2030.

As of 2021 data analyzed by BloombergNEF, Bank of America funded low carbon and high carbon transaction activities in equal proportion (a ratio of 1:1). However, in order for Bank of America to comply with a 1.5˚C compatible trajectory of slashing global emissions in half by 2030, the Bank must increase its funding of low carbon transaction activity by a factor of at least four relative to its funding for high carbon transaction activities.

That means that Bank of America must rapidly shift its portfolio behavior and make demonstrable progress scaling up support for clean energy and scaling down its support for dirty energy year-on-year. That progress, or lack thereof, captured in a yearly updated financing ratio must be accessible information for shareholders as it will show if the Bank is serious about taking commensurate action to advance the global energy transition, achieve its own transition and net zero plans, and address climate financial risks including physical, asset, legal, regulatory, and reputational risks.

While BNEF will continue to calculate these ratios for individual banks and the broader economy using the best available data, they explicitly cite data availability as a limitation of their model. To date BNEF uses mostly external data sources and estimations to derive their measurements, not bank-supplied data contrary to what Bank of America claims in their proxy note to shareholders. Banks must begin calculating and publishing these ratios themselves. Moreover, Bank of America already committed to collecting the requisite data from its internal operations and clients in its Approach to Zero plan. Meanwhile, BNEF figures will remain a crucial check to keep banks honest.

Bank of America’s argument to its shareholders that it doesn’t need to provide them with data they can get from a third party is an abdication of its responsible governance. It’s like saying, “Why bother doing our own homework when we can just copy off someone else?” Bank of America’s argument is also undermined by the actions of its peers; both JPMorgan Chase and Citigroup have agreed to publish their respective financing ratios.

Bank of America’s reluctance to disclose its energy financing ratio is part of a broader pattern of transparency shortcomings, which include inadequate disclosure of the bank’s efforts to reduce its overall emissions and in its management of transition finance. BOA has made crucial progress in setting targets for reducing emissions from high-emitting sectors including but not limited to its financing for energy and power sector activities. But BOA has still only committed to reducing the carbon intensity of its lending and not to setting absolute emissions reduction targets for these sector activities. Transparency on changes in the carbon intensity of bank portfolios is already incomplete transparency on the actual level of emissions generated by the bank’s portfolio. BOA can’t point to an already deficient disclosure practice as justification for why it doesn’t need to provide more data, disclosures, and information to its investors, clients and shareholders.

Transition finance is a critical area of bank activity but it requires more disclosure and transparency not less and the transparency that exists currently is not sufficient to meet BOA’s fiduciary responsibility to its shareholders. It is because transition finance has blended elements of sustainable and high-carbon support that investors and shareholders need as much information and consistent disclosure about these practices as possible. Financing support to help clients transition away from fossil fuels is critical but must be accompanied by rigorous measurement against clear benchmarks to ensure that bank clients are making unambiguous, rapid, and science-aligned progress. If client’s can’t show measurable decarbonization progress then banks, like BOA, must pull back from funding them or be branded as greenwashers.