JPMorgan Chase: The Bank that Is Destroying the Earth for Oil
November 14, 2017
Despite the urgent imperative to keep at least two thirds of all fossil fuels in the ground in order to avoid catastrophic climate change, many governments and companies continue to recklessly expand fossil fuel activities across the globe. And, in the lead, is a major US-based bank -- JPMorgan Chase. Customers should be troubled that banks are financing fossil fuel projects that are harming our planet's environmental sustainability and communities that have been stewards of our planet for generations.
The Banks that Are Destroying the Earth for Oil
These Financial Institutions Invest in Amazon Destruction
Despite the urgent imperative to keep at least two thirds of all fossil fuels in the ground in order to avoid catastrophic climate change, many governments and companies continue to recklessly expand fossil fuel activities across the globe.
Where does the money come from to finance senseless drilling for oil in the Amazon? In large part from the investments of giant US-based financial institutions. A new Amazon Watch report shows that JPMorgan Chase, the biggest US bank, and BlackRock, the world's largest asset manager, provide key financing to oil and gas companies operating recklessly in the Amazon.
Three such companies are GeoPark, which recently bought a concession to explore for oil on Achuar territory in Peru; Frontera, which insists on maintaining a Peruvian drilling contract despite massive indigenous protests; and Andes Petroleum, which intends to drill for oil in the pristine "Living Forest" of the Sapara in Ecuador. These projects threaten the most biodiverse rainforest in the world, and they would violate indigenous peoples' rights and despoil their territories.
Investing in Amazon Destruction
Why Private Financial Institutions
Must Divest from Amazon Crude -- Now
(November 2017) -- As this report goes to print, many communities are struggling to recover from the climate chaos of 2017. While wildfires, hurricanes, and floods are naturally occurring events, their recent intensity and frequency give us a glimpse of the devastation to come if we don't act now.
The prevailing science says the world needs to keep two-thirds of proven fossil fuel reserves in the ground to avoid reaching 2°C of warming and to have a fighting chance at escaping the most catastrophic effects of climate change. Nevertheless, many governments and companies continue to build infrastructure and explore for more fossil fuel reserves in places critical to climate stability, like the Amazon rainforest.
If they continue to expand into this and other fossil fuel frontiers, the world will miss the Paris Accord targets by a long shot, and the climatic consequences will likely be more severe than we can now even imagine.
Expanding Amazon the fossil fuel frontier doesn't just spell disaster for the climate. Much of this expansion directly overlaps the ancestral territories of indigenous peoples, often violating their legally guaranteed right to reject projects they do not want and placing them on the front lines of the environmentally- and culturally-damaging impacts of such projects.
Although fossil fuel companies do the drilling, they would not have the capital they need to expand the fossil fuel frontier into primary rainforests and indigenous territories and trample on human rights if it were not for the financial institutions that provide the capital for that expansion.
Professed corporate commitments to environmental and social responsibility notwithstanding, private financial institutions are literally bankrolling the path to an unlivable and inequitable world.
Amazon Watch research found that two of the world's largest private financial institutions, JPMorgan Chase and BlackRock, are invested in companies, like GeoPark, Frontera Energy, and Andes Petroleum, that currently hold licenses to explore and/or drill in the Western Amazon's fossil fuel frontier in blocks on or near the territories of indigenous nations that have not been properly consulted or have explicitly rejected the presence of oil drilling on their land.
The threat to climate stability, biodiversity, and indigenous rights posed by oil extraction in the Amazon directly translates to serious legal, reputational, political, and financial risks for the operating companies and their financial backers. Failing to recognize and act on these risks means that these financial institutions -- and ultimately their investors and customers -- will face significant economic and reputational repercussions.
The Global Imperative to Keep Fossil Fuels
In the Ground and Protect Indigenous Rights
Make no mistake: the extreme climate disruption experienced by communities around the world in the Summer and Fall of 2017 is fossil-fueled. While it is true that wildfires, hurricanes, and floods are natural, the intensity and frequency of these events -- in a world that has already warmed more than 1.1 C since the 19th century -- give us a glimpse of the climate chaos to come if we don't act now. Most of the warming has occurred in the last 35 years, with sixteen of the last seventeen being the hottest on record.
Scienti c research says we need to keep two-thirds of proven fossil fuel reserves in the ground to keep from hitting 2 C and have a fighting chance at avoiding the catastrophic effects of climate change. If this summer and fall are any indication, we need to stop digging, now.
Nonetheless, governments and companies continue to build additional infrastructure in the search of more fossil fuel reserves in places critical to climate stability like the Amazon and the Arctic. If we continue to open up the fossil fuel frontier, the world will miss the Paris Accord targets by a long shot, and the climate chaos will only get worse.
But we don't have to look far to find the drivers behind this expansion into the fossil fuel frontier and its climate consequences. Many of the climate villains were unmasked in a September 2017 study, which found that 90 major industrial carbon producers contributed approximately 43 percent of the observed rise in atmospheric CO2, causing about 29 to 35 percent of the rise in global mean surface temperature and between 11 and 14 percent of global sea level rise since 1980.
Given that they have been aware of their role in contributing to climate change since at least the 1960s, fossil fuel companies have a particular responsibility to, at minimum, cease doing harm. And, as Oxford University Professor Henry Shue writes, "ceasing to contribute to harm includes ending exploration for additional fossil fuels."
The harm caused by expanding the fossil fuel frontier does not just spell climate disaster, however. Much of this frontier directly overlaps with the ancestral territories of indigenous peoples, placing them on the front lines of the environmentally- and culturally-damaging impacts of such projects and often trampling their right, fully recognized in international law, to reject projects they do not want.
Furthermore, leading researchers like those at the World Resources Institute continue to demonstrate that involving indigenous peoples in land management and protecting their land rights provides one of the most effective strategies for stopping deforestation, and therefore for climate change mitigation.
Financial Institutions Provide the Primary
Business Tool for Oil Companies and Assume Their Risks
Fossil fuel companies would not have the capital they need to expand the fossil fuel frontier and infringe on indigenous rights if it were not for the financial institutions bankrolling that expansion.
"Financial services companies provide the capital, security, and the foundation needed for economic growth in both the domestic and global markets," proclaims the Financial Services Roundtable, an industry group of which leading financial institutions like JPMorgan Chase and BlackRock are members.
So while it is the fossil fuel companies that do the drilling, and as such, bear great responsibility for the climate and human rights impacts of their activities, the investments of financial institutions make the drilling possible and provide the tools with which to relentlessly expand operations.
As the Task Force on Climate-Related Financial Disclosures wrote in its 2017 recommendations, "Large asset owners and asset managers sit at the top of the investment chain and, therefore, have an important role to play in influencing the organizations in which they invest . . . "
By providing equity investments and loans to fossil fuel companies at various stages of production, and even entering into contracts to purchase their products, banks provide startup and working capital, as well as consumer demand, to companies that produce fossil fuels.
In the case of the Amazon rainforest, Amazon Watch research found that two of the world's largest private financial institutions, JPMorgan Chase and BlackRock are invested in companies, including GeoPark, Frontera, and Andes Petroleum, that currently hold licenses to explore and drill in oil blocks overlapping or near the rainforest territories of indigenous nations opposed to oil extraction. The consequences of these investments are dire for the climate, for the affected indigenous people, and for the security of JPMorgan and BlackRock's investments.
It is true that many financial institutions, JPMorgan and BlackRock included, have made corporate responsibility commitments, both as individual institutions and as part of joint initiatives like the Equator Principles (see more in addendum, below). Some have even made investment changes, like JPMorgan's decision to phase out financing for coal mining.
But these commitments often fall woefully short of what is needed to keep the world from a future of 2°C warming and to respect the rights of indigenous peoples. To date they have yet to address investments in oil drilling in the Amazon, leading Amazon Watch to join the movement calling on financial institutions to put their money where their mouth is and divest from Amazon crude oil drilling.
Frontier Fossil Fuel Extraction in the Amazon:
Deadly for the Climate, Biodiversity, and Indigenous Peoples
The Amazon rainforest is an unparalleled global treasure. Encompassing an area the size of the continental United States, the world's largest rainforest covers 40% of South America, produces a fifth of the world's owing freshwater, and hosts 30% of global biodiversity.
The trees of the Amazon rainforest have long served as a key carbon sink and oxygen producer for the entire world -the lungs of the planet. However, new research indicates that deforestation and degradation caused largely by industrial development has begun to limit the rainforest's ability to absorb carbon. "Destroying the Amazon . . . is like shooting yourself in the foot," says leading climate scientist Antonio Nobre.
"The Amazon is a gigantic hydrological pump that brings the humidity of the Atlantic Ocean into the continent and guarantees the irrigation of the region." The lead author of a March 2017 report from the German Potsdam Institute for Climate Impact Research put it another way: "The Amazon rainforest is one of the tipping elements in the Earth system."
The opening of new oil drilling concessions constitutes one of the most serious threats to the western region of the Amazonian biome. Existing and proposed oil and gas blocks in the Amazon cover over 280,000 square miles, an area larger than the state of Texas. While oil and gas are presently extracted from only about 7 percent of these blocks, hydrocarbon exploration is occurring in an additional 52 percent and national governments aim to lease more land to energy companies in the coming years. Ecuador, for example, will soon open a new bidding round on oil blocks not currently under contract in the Amazon.
When the rainforest is destroyed from impacts associated with oil drilling, it threatens not just the climate and biodiversity but the health and way of life of hundreds of distinct indigenous peoples encompassing hundreds of thousands of individuals who have lived in this region for millennia. These indigenous peoples not only protect the natural environment but also rely on the rainforest for their livelihoods and wellbeing.
From hunting in the forest, to fishing in the many tributaries of the Amazon River, to cultivating subsistence crops in small village plots, the cultures of indigenous peoples and traditional communities are shaped by their relationships with the forest and rivers.
Oil operations have particularly toxic impacts on the health of indigenous communities. In one oil-producing region of the Peruvian Amazon, 98 percent of children in indigenous communities have high levels of toxic metals in their blood as a direct result of oil extraction waste products in their environment, and the country's Environmental Ministry declared four river basins impacted by an oil company's operations "environmental emergencies."
Several of the oil blocks under concession or soon to be auctioned overlap with extraordinarily diverse forests such as Ecuador's Yasuní National Park, a UNESCO Biosphere Reserve. Experts consider the park among the most biodiverse places on the planet -just one hectare contains more local species of trees than identified in all of the US and Canada combined -- and boasts record levels of insects, birds, and mammals.
It is also home to members of the country's last two indigenous peoples living in voluntary isolation, the nomadic Tagaeri and Taromenane indigenous nations. Most of the barrels of crude oil extracted from this vulnerable region will likely be sold in the US, primarily in California.
Given its immense value to climate mitigation, not to mention to the hundreds of indigenous nations that call it home, the Amazon is the last place to continue expanding an industry that is imperiling the planet's future. Along with the companies that do the actual drilling, the financial institutions that invest in those companies bear responsibility for this threat to our climate and to the rights and lives of the Amazon's indigenous peoples.
US Private Financial Institutions
Financing Amazon Oil Extraction
According to research conducted by Amazon Watch during August 2017, many private financial institutions based in the United States invest in companies that currently drill, or plan to drill, for oil in the Amazon. These financial institutions include household names, like JPMorgan Chase, and lesser-known but powerful asset managers like BlackRock, despite the fact that both institutions promote their social and environmental responsibility.
Amazon Watch reviewed investment data for three companies -- GeoPark, Frontera Energy, and Andes Petroleum -- playing a key role in oil exploration and extraction in the Western Amazon. These three companies each hold concessions for oil blocks located in the Amazon fossil fuel frontier and that are on or near the territories of indigenous peoples who have openly expressed rejection of drilling but which have not been effectively consulted per FPIC requirements.
The three companies are varied: they include a small Santiago-based rm founded by a US citizen, a recently-renamed and -restructured Canadian company with a scandalous history in the region, and a joint venture wholly-owned by two Chinese state-run rms. What they do have in common is their relatively small size, at least in terms of the oil industry, and lack of widespread brand recognition, allowing them to fly below the radar and avoid much scrutiny of their activities, at least until now.
Two Key Actors: JPMorgan Chase and BlackRock
Consumers and businesses seeking to bank with companies that respect our environment could be forgiven for choosing either JPMorgan Chase or BlackRock based upon their corporate responsibility statements.
Such customers should be troubled, however, that these institutions are actually putting their funds to work by financing fossil fuel companies whose projects are harming a critical region for our planet's environmental sustainability, as well as communities that have been stewards of our planet for generations.
Though many private US financial institutions have invested in the companies drilling for oil in the Amazon, we have selected two on which to focus, given their size and global reach, and the insincerity of their stated commitments to "corporate social responsibility."
And while the investments of these two financial institutions do not comprise a majority stake in either of the three oil companies, the relatively small size of the companies means that the investment capital provided by JPMorgan and BlackRock is not insignificant, even when the amount of cash is modest, and decisions by either of these institutions to divest would have an substantial impact on the oil industry's ability to continue drilling in the Amazon.
Furthermore, the financing JPMorgan and BlackRock provide communicates support for a dangerous business model, and divestment by these two influential institutions would send a strong signal to all companies involved with oil drilling in the Amazon.
Finally, as a US-based institution, we believe that engaging the financial institutions that also call this country home is a crucial part of enacting change to prevent climate disaster, even in far-away lands like the Amazon rainforest. That is especially true given research conducted in 2016 and early 2017 that the majority of Amazon crude oil exports come to the US -mostly to California -and is refined and sold here.
JPMorgan Chase is the largest bank in the US and the sixth largest in the world.24 It has extensive global operations, including consumer banking, investment banking, asset management, private banking, private wealth management, and treasury and securities services divisions.
CEO Jamie Dimon has made clear his belief that he and JPMorgan should "do the right thing." He has, essentially, called banks the moral compass of the global financial system, saying in a 2016 interview that banking is a "relationship," and has indicated his belief that banks' activities should be guided by a higher purpose, asserting that banks "have to say no to customers" because "it may not be in the client's best interest."
In a recent statement to shareholders, Dimon wrote, "as long as we continue to do our jobs well and continue to drive our company forward, we think we can be a leader for our industry and the communities we serve for decades to come."
JPMorgan Chase has also made specific commitments and statements of support in the environmental realm. As the bank states in its current environmental and social policy, "[p]rotecting the natural systems which all life depends on while lifting people out of poverty and advancing economic development are among the greatest challenges confronting humanity. We recognize that the policies and practices we adopt today will shape not only our lives but also those of future generations."
It has committed to use 100 percent renewables in its direct operations by 2020, and to provide $200 billion in "clean financing" through 2025. It has signed letters in support of the Paris Agreement, and it is a member of
the Equator Principles Association, a group of 91 financial institutions that have committed to voluntary standards governing their investments in large infrastructure projects (more details in the Addendum, below). And, encouragingly, JPMorgan has recognized, in part, its role in funding climate change by committing to phasing out financing of coal mining.
Yet despite these lofty goals and pronouncements, Amazon Watch research found that JPMorgan Chase has almost $113 million in combined debt and equity investments in GeoPark, Frontera, and the two parent companies of Andes Petroleum, thus supporting these companies' destructive oil activities in the Amazon rainforest.
The asset manager BlackRock is the world's biggest investor, with 135 teams in 30 countries. During the 2008 financial collapse, the US government handed it multiple contracts, making it "the leading manager of Washington's bailout of Wall Street."
Its asset management business handles around $1 trillion of pension and retirement funds for millions of people in the US, as well as the investments of dozens of state and local governments, college endowments, and sovereign-wealth funds. This kind of reach means that the company holds immense influence over world financial markets.
The company appears to pride itself on its environmental and social responsibility commitments, writing on its website, "BlackRock is deliberate in our commitment to using our resources responsibly to support the long-term sustainability of our firm and of the global environment in which we and our clients live and operate."
BlackRock CEO Larry Fink has stated, "sustainability means longterm thinking in every respect, whether it be reducing our energy consumption, contributing to communities or building better financial futures for our clients. It is about responsible decision-making -- an attribute that's at the very core of BlackRock."
And in the introduction to a 2016 report on how to adapt portfolios to climate change, the company writes, "[e]nvironmental, social, and governance (ESG) factors relevant to a company's business can provide essential insights into management effectiveness and thus a company's long-term prospects."
CEO Larry Fink also touts long-term thinking in the investment world. In a 2016 letter to 500 fellow CEOs he chided them for focusing on short-term profits, writing, "many companies continue to engage in practices that may undermine their ability to invest for the future," like neglecting environmental and social factors.
"Over the long term," he wrote, "environmental, social and governance issues -ranging from climate change to diversity to board effectiveness -have real and quantifiable financial impacts," and he specifically mentions the Paris Agreement.
In September 2017, BlackRock launched its first-ever "socially responsible" equity fund that is also fossil fuel-free. The company also recently hired a former Obama Administration climate change advisor to serve as its head of ESG investing.
In a 2010 profile of Fink in Vanity Fair, the BlackRock CEO recalled losses earlier in his career and said he "vowed never again to be in a position where he did not fully understand the risks he was taking in the market." Yet BlackRock's investments in frontier fossil fuels in the Amazon involve a lot of risk for the climate, biodiversity, and indigenous peoples, not to mention BlackRock's customers.
Amazon Watch research shows that BlackRock holds almost $567 million in stocks and bonds in GeoPark, Frontera, and the two parent companies of Andes Petroleum. The majority of that -- over $553 million -- is invested in one of Andes Petroleum's parent companies, Sinopec, which is under investigation by US authorities over bribery allegations.
[Read the complete report online at http://amazonwatch.org/assets/files/2017-investing-in-amazon-destruction.pdf.]
Posted in accordance with Title 17, Section 107, US Code, for noncommercial, educational purposes.