Lachlan's avatar@lachlanjc/edu
All Green World

Researching an assumption

Before returning to NYU, I was working at a startup called Watershed, which helps large companies measure their carbon footprints, make reduction plans, & invest in carbon removal. We got to work with organizations invested at a deep level in decarbonizing their operations, measuring ever-more accurately & coming up with industrious, creative ways to reduce harmful emissions. The entire team worked incredibly hard to stay up-to-date on the latest science & ensure we were driving true reductions, not becoming a box companies could check for greenwashing.

Personal carbon footprints, in a corporation-centric society, are not a helpful tool for understanding emissions, because they assume as consumers we could choose to purchase zero-carbon options without drawbacks, which is unfeasible. Our personal carbon footprints are merely a subset of whichever corporations we willingly/are forced to transact with; decarbonizing corporations & governments will zero out personal carbon footprints, not the other way. (Unsurprisingly, BP’s PR arm invented & popularized the concept, & it’s not difficult to trace their motivations.)

Corporations measure their carbon footprints, by & large, using the Greenhouse Gas Protocol, which divides emissions into 3 scopes. Scope 3, indirect emissions (upstream by suppliers plus downstream by consumers), is the largest for the majority of companies, but by far the hardest to measure, since it’s recursive (e.g. if you manufacture physical goods, you buy ingredients, you have to figure out the manufacturing footprint of each of the suppliers for those ingredients, all the way to the electricity purchased wherever those suppliers manufacture). I’ve always wondered:

If every company worldwide measured their emissions with this framework, then zeroed them out, would carbon pollution stop?

Beyond supplies like electricity, one common piece of infrastructure ties every corporation together across sectors: banking. Companies keep their money in big banks to protect & grow their cash reserves. I researched the carbon impact of corporate finances, using the report “The Carbon Bankroll” written earlier this year by environmental groups the Climate Safe Lending Network, the Outdoor Policy Outfit, and BankFWD. Bill McKibben covered this report for The New Yorker last summer, which provided helpful context.

The headline: measuring the carbon impact of corporate finance with conservative, early estimations can double the measured footprints of large corporations. As in, if every company measured & zeroed out emissions using the industry-standard methodology for progressive companies—a process that will optimistically take much of the century—we’d nonetheless be facing runaway carbon pollution.

Companies financially benefit & critically rely on their banking partners, so they should unquestionably be included in a full Scope 3 measurement, but the mathematical tooling to do so has never existed. How this works, according to the report:

  1. Companies generate cash
  2. Cash is held with major banks
  3. Major bank investments include fossil fuel development
  4. Fossil fuel development generates carbon emissions

We know that there are no safe pathways for climate that involve any new fossil fuel infrastructure, yet every fossil fuel company continues to invest in expanding new extraction, refining, & processing infrastructure, locking us into decades of growing carbon emissions even as other companies make genuine efforts to reduce emissions.

Putting numbers to banks’ investments, via the report:

The lending and underwriting of carbon-intensive sectors at this rate generates a massive carbon footprint. The research featured in this report suggests that the average carbon intensity per unit of cash deployed by the US financial sector is 126.03 ktCO2e/billion USD. As context, a typical passenger vehicle emits roughly 4.6 metric tons of CO2 per year, meaning that for every $1 billion in cash a bank deploys, it generates comparable emissions to 27,398 vehicles’ annual emissions.

The emissions that Apple’s cash generated was nearly three times larger than the total emissions generated by the use of every Apple product in the world in 2021.

Since 2015, JPMorgan Chase, Citi, Wells Fargo, and Bank of America have invested $1.2 trillion in the fossil fuel industry.

Last week, Rep. Rashida Tlaib asked banking CEOs whether they’d consider no longer funding fossil fuel projects. Jamie Dimon, the CEO of JPMorgan Chase, the largest bank in America, responded: “Absolutely not, and that would be the road to hell for America.”

Corporate finance is never a topic I expected to have passionate feelings about, coming to art school, but no matter the true magnitude of emissions from banking we end up calculating, it’s clear our systems of measuring corporate climate footprint are not yet all-encompassing. In the same way consumers cannot truly choose to zero out their footprints, the largest corporations are stuck using these big banks, but unlike individuals, they collectively have the power to negotiate fossil-free financials for themselves & the rest of us. While I do expect this country to outlaw financing for new fossil fuel projects eventually, it will take decades longer than we have to dig ourselves out of our carbon crisis.