There is widespread evidence that the policies and practices of many major financial institutions are not climate-friendly. Many of the world’s largest financial institutions exhibit a clear disconnect between concrete short-term targets and actions needed to address the climate challenge, and the limited long-term targets currently being set by the financial sector.1 The impact of the major financial institutions must be considered. Their decisions funnel major new investments in long-lived capital infrastructure that strongly influence the trajectory of greenhouse gas (GHG) emissions and climate resiliency.
A recent report from Columbia University spotlighted a specific aspect of this problem: political influence by major financial institutions in the United States.2 The research tracked (i) political payments by financial institutions made to members of Congress during the 2006 and 2022 election cycles; and (ii) lobbying efforts by those financial institutions in the same years.
Major financial institutions’ total lobbying spending in the United States exceeded $663 million. Twelve of the 15 institutional categories increased their spending on lobbying from 2006 to 2022. The overall net increase was 52%. The three largest spenders on lobbying in 2022 were insurance, securities and investment, and real estate.
The authors of the Columbia report note that the lack of transparency in corporate influence in politics makes it difficult to say definitively how financial institutions use their direct influence and engagements on climate-related measures. But there is ample evidence that, on balance, many financial institutions obstruct climate policy rather than support it.3,4,5
Financial institutions also affect policy by directly contributing to the campaigns of politicians they may want to influence. Total payments by financial institutions to members of Congress amounted to $303 million in 2022. Eleven of the 15 institutional categories increased their campaign contributions from 2006 to 2022. The overall net increase was 59%. The three largest contributors to political campaigns in 2022 were securities and investment, real estate, and insurance.
What measures would shift the policy and practice of financial institutions in the direction of positive climate action? The report suggests a number of measures, including (i) a “cease and desist” order regarding lobbying and campaign contributions that oppose climate action; (ii) shifting new finance to investments that reduce emissions and enhance resiliency; and (iii) exerting influence on their the financed entities in their portfolios to support the clean energy transition.
1 InfluenceMap, “Finance and Climate Change,” March 2022, https://influencemap.org/report/Finance-and-Climate-Change-17639
2 Sachs, Lisa, Nora Mardirossian, and Perrine Toledano, “Finance for Zero: Redefining Financial-Sector Action to Achieve Global Climate Goals,” Columbia Center on Sustainable Investment, Columbia University, June 2023, https://ccsi.columbia.edu/finance-for-zero
3 Ceres, “U.S. Banks and the Road to Net Zero,” April 2023, https://www.ceres.org/resources/reports/us-banks-and-road-net-zero
4 Monasterolo, Irene. “Climate Change and the Financial System.” Annual Review of Resource Economics 12, no. 1 (2020): 299–320. https://doi.org/10.1146/annurev-resource-110119-031134
5 Khan, Mizan, Stacy-ann Robinson, Romain Weikmans, David Ciplet, and J. Timmons Roberts. “Twenty-Five Years of Adaptation Finance through a Climate Justice Lens.” Climatic Change 161, no. 2 (July 1, 2020): 251–69. https://doi.org/10.1007/s10584-019-02563-x
