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JP Morgan’s “Prohibited Transaction” list: A clear sign of change

March 8th, 2016 · 1 Comment

Leading financial firm JP Morgan has issued a new Environmental and Social Policy Framework document.

JPMorgan Chase believes that balancing environmental and human rights issues with financial priorities is fundamental to sound risk management and a core part of corporate responsibility.

This 23 page document has 16 uses of the words “climate change”. And, reflecting this, the document lays out explicitly that how a firm once one of leading financiers of coal projects will accelerate its move beyond coal*. Most notably, ‘green field’ coal mining is now to be treated like projects using child labor and endangering world heritage sites.

transactions that we will not finance:

  • Forced or Child Labor: Transactions where there is evidence of the use of forced or child labor;
  • World Heritage Sites: Transactions for natural resource development within UNESCO World Heritage sites;
  • Coal: Transactions that involve asset-specific financing where the proceeds will be used to develop a new greenfield coal mine or a new coal-fired power plant in a high income OECD country.
  • Illegal Logging: Transactions with entities or projects that collude with or are knowingly engaged in illegal logging.
  • Uncontrolled Fire: Transactions with entities or projects that lack an explicit policy against the uncontrolled and/or illegal use of fire in their forestry, plantation or extractive operations.

With this, JP Morgan has joined Morgan Stanley and Citigroup in creating a ‘no go’ zones for coal as part of a shift toward climate aware financing.

To be clear, these financiers haven’t renounced coal entirely — but have created significant restrictions and guidance as to what is and isn’t acceptable coal-related investing (see pages 8-9).

Moving the financial markets and financial firms toward climate-sensible policies is critical to fostering a climate-friendly and prosperous future.  Policies and statements like those JP Morgan Chase just released are tangible signs of progress toward this.

This document is an interesting read, from the high-level objectives to the wording to enable their desired flexibility for financing that might conflict, in some manner, with those objectives.  This quick look commentary does not rely on a detailed analysis.  Again, however, you might find it interesting to read.

As an example, from the introduction:

As a global provider of financial advisory and lending services for clients in various sectors and geographies around the world, we recognize that our business decisions have the potential to impact surrounding communities and the environment. JPMorgan Chase believes that balancing environmental and human rights issues with financial priorities is fundamental to sound risk management and a core part of corporate responsibility.

Protecting 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. Therefore, we have designed policies that ensure environmental and human rights impacts are identified early, carefully evaluated and managed responsibly. Such policies not only promote positive environmental stewardship, but also highlight business opportunities to support investments in renewable energy, energy efficiency, sustainable water management, sustainable forestry and sustainable supply chains. Attention to environmental and social (E&S) issues helps us to better manage risk, attract and retain critical talent, develop expertise and provide clients with suggested solutions to pressing sustainability issues in their businesses.

 

Note: *: the “beyond coal” comment is linked to the Sierra Club’s “Beyond Coal” campaign which JP Morgan Chase does not, as far as I am aware, participate in.

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Tags: coal

1 response so far ↓

  • 1 Calamity Jean // Apr 1, 2016 at 1:21 pm

    It’s disappointing to see that JP Morgan is only banning coal-related “Transactions that involve asset-specific financing where the proceeds will be used to develop a new greenfield coal mine or a new coal-fired power plant **in a high income OECD country.**” Dirty money-wasting coal power is good enough for poorer countries.