You can’t talk about the top banks in the United States without mentioning Bank of America. It’s the second-largest banking institution in the country. As such, it’s every bit a “big bank” as the definition of that term would have you believe.
To get a size of its massive scale, consider this: Bank of America is the eighth largest bank in the world. It’s also among the Big Four banking institutions in the United States, the ones that are informally considered too big to fail.
Commercial banking, investment banking, and wealth management are the primary financial services that Bank of America provides. It accounts for almost 11 percent of all American bank deposits. That gives the company a lot of money on its books that it can use to extend loans and other credit products.
Financing for projects in the fossil fuel industry remains a big business for these massive banks. 60 of the largest commercial and investment banks collectively financed $3.8 trillion for fossil fuel companies between 2016 and 2020. This number is particularly noteworthy as it represents that five years since the Paris Agreement was signed.
It shows that big banks hold a substantial amount of power that could ultimately impact what fossil fuel companies are doing to our planet. While some banks have indeed reduced the funding that they provide to these companies, for others it has just been business as well.
A report titled Banking on Climate Chaos 2021 published by a group of climate organizations shows that Bank of America’s fossil fuel financing has been on the rise since the Paris Agreement was signed.
What’s interesting to note is that this surge in financing has been to the tune of $198 billion. That’s even though Bank of America announced in May 2015 that it was going to reduce its exposure to coal companies.
It’s unheard of for a bank the size of Bank of America to not have been caught up in controversy. There are more than a few instances in which the ethics of the bank’s actions have been called into question. In some cases, it has also made financial settlements to address its liabilities.
The United States government had alleged in 2010 that Bank of America had defrauded hospitals, schools, and many state and local organizations through misconduct and illegal activities. The allegations stemmed from the investment of proceeds from municipal bond sales.
The bank decided to settle these allegations. It paid $137.7 million which included $25 million to the IRS and $4.5 million to the state attorney generation as well as the affected organizations.
Bank of America settled federal allegations related to discrimination against the recipients of disability income. It was alleged that the bank had discriminated against and had a policy of denying mortgage and home equity loans to adults that had disabilities.
The bank ultimately decided to settle the matter. It paid almost $4,000 per loan to eligible loan applicants that were affected by the policies that were put in place in January 2010 and ran for several years.
$17 billion settlement
Bank of America has the unique distinction of having made what’s believed to be the largest settlement in US corporate history. It agreed to pay almost $17 billion in August 2014 to settle claims against it for the sale of toxic mortgage-backed securities. These included subprime home loans.
As part of its settlement with the US Justice Department, the bank agreed to $9.65 billion in fines in addition to $7 billion being provided as relief to the victims of those faulty loans that included homeowners, pension funds, borrowers, and municipalities.
While the settlement may have been the largest, according to one real estate economist, it was merely a slap on the wrist when you consider the $700 billion in damages done to 11 million homeowners.
As the pressure mounts on big banks to do more in order to make their operations more sustainable, Bank of America has also responded with sustainability efforts that extend far beyond changes to how it operates. The bank has undertaken a review of its lending policies to ensure that the companies it funds are also sustainable.
Bank of America has created a public document that outlines the bank’s coal policy. It recognizes that the bank has a responsibility to leverage its scale and resources to accelerate the shift from a high-carbon to a low-carbon society.
That doesn’t mean it will stop funding all coal projects immediately. It undertakes to maintain a reduced level of credit exposure to coal extraction companies. However, given its massive scale, even a reduced exposure in this sector would likely mean tens of billions in financing for coal extraction companies.
The policy further adds that the bank is not going to fund coal mining companies that are not working to tackle substantial, ongoing, or recurring violations of its and other environmental, health, and safety standards.
Net greenhouse gas emissions
Bank of America has a stated goal to achieve net-zero greenhouse gas emissions in its financing activities, operations, and supply chain before 2050. This commitment primarily covers the bank’s operations that are actively being made more sustainable to reach compliance by the stated deadline.
As part of its shift to make the bank’s operations more sustainable, Bank of America has strived to achieve carbon neutrality and procured 100% renewable energy in 2019, a year ahead of schedule.
Financing of low carbon activities
Bank of America has invested over $200 billion since 2007 to finance low-carbon and sustainable business activities across the globe as part of its Environmental Business Initiative.
Its financing commitment has focused on providing access to credit for businesses that create innovative solutions to climate change and other environmental challenges.
$1 trillion commitment to a low-carbon economy
As part of its Environmental Business Initiative, Bank of America has committed to deploying and mobilizing $1 trillion by 2030 to speed up the transition to a low-carbon and sustainable economy.
Its multi-year financing commitment provides capital to help companies develop innovative solutions that can tackle the planet’s environmental woes.
Can there ever be a truly green bank?
“Green banking” is a buzzword that has been deployed far and wide by the banking industry. Almost all of the world’s largest banks were offering some sort of green banking solution to their customers as far back as the mid-2000s.
It was just a way for them to capitalize on the growing public sentiment for the betterment of our environment. As one would expect, these green marketing solutions rarely amounted to anything more than a well-planned marketing strategy for a production that they were already offering to customers: paperless or digital banking.
Truly green banking would require banks to stop all manner of funding and financing to industries that are actively contributing to the destruction of our planet. The fossil fuel industry is one of the biggest culprits here and unfortunately, it still presents too lucrative of a business opportunity for big banks to put their money where their mouth is.
That’s one of the reasons why the green banking revolution isn’t being driven by the titans of the industry. The change is coming from startups and socially conscious online banks that have a mission to push the world towards clean energy, even if that comes at the cost of maximizing profits.
How Aspiration is helping to make the world a better place
Aspiration is a neobank. A neobank exists entirely online. It doesn’t have a branch network and customers’ only touchpoint with the bank is the mobile app or online banking interface.
Since it doesn’t have a retail footprint, it doesn’t consume anywhere near the kind of energy that big banks with nationwide retail networks do. Right off the bat, Aspiration is significantly more sustainable in its operations than conventional banks will ever be.
Aspiration is 100% committed to clean money. No customer deposits are used to fund fossil fuel projects. This socially conscious value is what most like-minded customers appreciate about the neobank.
The products that it offers have also been designed to deliver a positive climate impact. Customers have the opportunity to plant a tree with every purchase and invest in funds that only include companies serious about protecting the planet all while earning up to 1.00% APY on its cash management account.
Open an Aspiration cash management account today and join the green banking revolution.