The COVID-19 pandemic has been a tragedy for many, a crisis for millions more. It has exacerbated age-old inequities and taken a heavy toll on economic growth.
Its long-term effect on our lives is still unclear, but that uncertainty must not induce paralysis. This can be a moment for change, a chance to reset priorities.
Climate change is among the most urgent problems facing humanity; businesses and governments have an imperative to act. Achieving the goals of the Paris Agreement, which aims to restrict a rise in the world’s average temperature, would enable us to take a giant step toward a safer, greener, more sustainable future.
Meeting those goals will demand great reserves of human energy and ingenuity. For the world to achieve net-zero greenhouse gas emissions by 2050, there needs to be an acceleration of emerging technologies that are not yet widely commercially available or economically viable. That means fossil resources such as oil and gas, which currently supply 80% of the world’s energy, will continue to play a significant role in satisfying future energy needs—from fueling factories to warming our homes.
Another stumbling block is data. While recent private sector commitments have focused on accounting measures to quantify banks’ contributions to the climate challenge, there remains an urgent need to improve the availability of accurate and verifiable emissions data reported by companies. Better data would make it easier to measure results, track progress, and drive accountability in a concerted way, enabling financial markets to make more informed decisions about climate risk.
These hurdles are significant but not insurmountable.
Our company, JPMorgan Chase, announced this month that we will start aligning our financing portfolio to meet the Paris goals. We will focus on three sectors in particular: oil and gas, electric power, and automotive manufacturing, because they collectively generate a significant share of global emissions. As a global financial services firm, we do business with most Fortune 500 companies, including many in the energy sector, so we believe our capacity to make an impact is considerable.
Working to overcome the difficulty of capturing accurate data, the approach we are developing will include the measurement of carbon intensity, which tracks emissions relative to a unit of output. In the power industry, for example, the calculation would evaluate metric tons of carbon dioxide per megawatt hour of electricity produced.
Measured over time, in conjunction with other indicators, carbon intensity will provide insights about efficiency and business strategy, identifying producers who are improving their performance, and those who are not. As measurements improve and evolve, we will adopt best practices. In the meantime, we are establishing sector-by-sector intermediate emission targets for 2030 for these three industries that will go into effect during 2021.
Additionally, our firm is committing to becoming carbon neutral in our own operations beginning this year, going beyond our original promise to source renewable energy for our entire company.
There will be skeptics, we know, and those who choose to delay. But now is the time to act, to forge an economy that has sustainability and efficiency at its core and reduces pressure on the planet’s resources.
We want to be part of the solution. Our employees along with our many stakeholders want to help drive change. The vast majority of our clients do too, as many have announced action plans of their own. We believe it’s our obligation to help them, and the economy, transition from traditional energy sources and develop cleaner alternatives. It isn’t just good for the planet, it’s good for business and more attractive to key constituents such as investors, customers, and prospective employees.
Reaching the goals of the Paris Agreement won’t be easy. It’s a massive undertaking and demands a sustained effort. In addition to bold, cross-border government policies that remove barriers to a low-carbon world, companies must continue to advance sustainability through innovation.
The clock is ticking. The world is not on track to limit average temperatures from rising more than 1.5 ̊C–2.0 ̊C above preindustrial levels, which is the goal of the Paris accords, and we are running out of time to prevent long-term devastation to our planet and our communities.
It has taken a global pandemic to prompt dramatic changes to the way we work, live, and consume. We’re optimistic that industry and governments will harness the momentum and rise to the challenge. Our bank intends to, and our shared future depends on it.
Daniel Pinto is copresident of JPMorgan Chase and CEO of its Corporate & Investment Bank. Ashley Bacon is the chief risk officer of JPMorgan Chase.