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Financing 1.5°C: Contextualizing Wall Street’s Latest Climate Commitments

Financing 1.5°C is a new series exploring the unique challenges and opportunities facing global financial institutions as they look to transition the real economy toward a net-zero future. Financing 1.5°C aims to elucidate just what “climate alignment” means and looks like in practice, with a focus on actions the financial sector is taking to decarbonize high-emitting and hard-to-abate sectors. The monthly series is produced by RMI staff at the Center for Climate-Aligned Finance.

In the past two months, Bank of America, Citi, Goldman Sachs, and Wells Fargo became the latest US banking heavyweights to announce 2050 net-zero targets for their financing activities. The declarations add to the growing momentum of climate target announcements from fellow banking giants like TD Bank Group, JPMorgan Chase, HSBC, and Morgan Stanley in fall 2020 and RBC more recently.

RMI’s Center for Climate-Aligned Finance recently proposed a broad framework for breaking down banks’ climate commitments by analyzing coverage areas; the targets and pathways used; the proposed tools for analysis, disclosure, and reporting; implementation actions; and organizational approaches to meeting climate targets. Unpacking the announcements from Bank of America, Citi, Goldman Sachs, and Wells Fargo reveals how they align with and differ from their peers.

Each firm’s 2050 net-zero plans are in varying early stages, with Bank of America laying out “initial steps” on February 11, Citi announcing on March 1 it would publish its plan within the next year, Goldman Sachs highlighting its commitment in a March 4 update to its 2030 sustainable finance goals, and Wells Fargo announcing its target on March 8. Bank of America’s update to its Environmental and Social Risk Policy Framework (ESRPF)—also released in February—further demonstrates how the firm is aligning itself with the goals of the Paris Agreement.

Like JPMorgan, the four US banks are giving themselves timelines for delivering their next steps. Bank of America will disclose its financed emissions no later than 2023; Citi will announce 2030 targets for carbon-intensive sectors including energy and power in the next year; Goldman Sachs will set interim “business-related” climate targets by year-end; and Wells Fargo will disclose its approach to Scope 3 financed emissions within a year.



Coverage refers to the business units and financial products included in a climate commitment, such as lending versus capital markets activities or specific sectors. Bank of America, Citi, Goldman Sachs, and Wells Fargo—like most banks—have not yet specified if their commitments cover businesses like investment banking and capital markets. This is partly because there is not as much industry-wide clarity on coverage standards, especially for Scope 3 emissions. For instance, the Partnership for Carbon Accounting Financials (PCAF), a coalition working on measuring financed emissions and improving transparency through disclosure, does not currently have standards for capital markets. Goldman Sachs, however, becomes the first bank with a large asset-management business to incorporate “a low-carbon tilt” into its active quantitative equity funds—embedding carbon metrics beyond its environmental, social, and governance (ESG) funds.

Banks like BNP Paribas and ING have also delineated coverage by sector. Although Bank of America, Citi, and Wells Fargo all plan to establish interim emissions targets for high-emitting sectors like energy and power, they also acknowledge the need for more specifics and greater coverage.


Interim Targets and Pathways

Although interim targets are necessary both to give credibility to long-term targets and to guide decision-making today, setting short- and medium-term targets has proved difficult. Aside from insurer Aviva, which recently announced a 25 percent cut in the carbon intensity of its investments by 2025 and a 60 percent cut by 2030, very few global financial institutions have clearly defined interim targets.

The systemic challenges to understanding how to set interim targets include issues with data (e.g., where a firm stands today and where its clients are going) and pathways (e.g., what needs to happen on the ground beyond emissions, what do capital expenditures look like, and what technology shifts are required?). Working out these issues takes time, and it’s promising that Citi, Goldman Sachs, and Wells Fargo—like JPMorgan—have given themselves a clear timeline for releasing more details.

For the designated coverage area, commitments are further distinguished by targets (i.e., how much will portfolio emissions be reduced, and by when?) and pathways (i.e., what trajectory will portfolio emissions take over time toward the specified target?). BNP and Barclays, for instance, use the IEA’s Sustainable Development Scenario (SDS) to guide their energy and power commitments. Bank of America, Citi, Goldman Sachs, and Wells Fargo have yet to define these specific targets and pathways. “Once we feel confident in our calculations, we will set public goals to reduce emissions for key high-emitting portfolios, including energy and power utilities,” Bank of America noted in its ESRPF.


Tools for Analysis and Disclosure

Many analysis tools, methodologies, models, and platforms exist to support institutions in understanding where their emissions are today, and how they can transition their portfolios over time. Bank of America, Citi, and Morgan Stanley joined PCAF in July 2020, and Canadian banks TD, BMO, CIBC, and RBC followed suit in recent months. Their adoption of PCAF is a positive sign that we may see greater consistency and comparability in how banks assess and report on progress toward net zero. It is also a critical first step for them to understand key emissions hot spots to address in their portfolios.

Some of the banks have publicly committed to disclosure goals and timelines. Bank of America, which published its Task Force on Climate-Related Financial Disclosures report in April 2020, says it is committed to disclosing its financed emissions by 2023. Wells Fargo will disclose financed emissions for oil and gas and power by the end of 2022, and Citi has also pledged to begin reporting.


Implementation Actions

Banks can utilize certain levers to influence decarbonization in the real economy, from designing products that support the transition of high-emitting companies and assets to offering services to support their clients’ transitions. Although Bank of America said it would use its expertise, resources, and influence to mitigate and build resilience to climate change, we look forward to more details on the actions it and peers on Wall Street would take. Though Citi, too, did not provide concrete specifics on how it would meet its target, in its ESRPF it pointed to its track record and leadership in initiatives like the Poseidon Principles—and the potential for collective financial sector action to drive change.


Organizational Approach

Banks are realigning internally and adopting different organizational responses to support the implementation of the new products, offerings, and services stemming from their climate commitments. One approach reflects an embedded model, where responsibility is dispersed across existing businesses by placing climate experts within a bank’s various verticals. Alternately, Wells Fargo, for example, has opted for a more centralized model involving a systemic reorganization around its commitment. Wells Fargo is creating an Institute for Sustainable Finance with a dedicated remit spanning the institution—similar to JPMorgan’s new Center for Carbon Transition.

Although Bank of America has not yet revealed its organizational approaches, Citi seems to be taking a centralized model, creating a task force of leaders across the company—from trading and investment banking to finance, risk, and legal teams. Goldman Sachs, like Credit Suisse, has taken a hybrid approach with elements of both the centralized and embedded models.



It is positive to see firms like Bank of America, Citi, Goldman Sachs, and Wells Fargo set out long-term climate ambitions and begin to take foundational steps to achieving those decarbonization goals. In the coming months, we will be looking for more information on near- and medium-term actions and targets from financial institutions as they elaborate on their plans. The Center for Climate-Aligned Finance stands ready to help financial institutions turn their climate ambitions into climate actions.