Alex Liftman, Bank of America’s global environmental executive, asserts that urgent global challenges like climate change require innovative financing strategies to attract a diverse array of investors. He emphasizes that targeting climate issues not only enhances economic value but also fosters the development of innovative solutions.
Bank of America is one of many financial institutions responding to the increasing demand for climate-focused initiatives. Liftman notes that scaling these projects mitigates investment risks and reduces financing costs for emerging sustainable business models, thus enabling greater capital flow towards environmentally friendly opportunities.
In January, BofA announced it achieved carbon neutrality a year ahead of schedule by cutting location-based emissions by 52% since 2010, obtaining all its electricity from renewable sources, and compensating for unavoidable emissions with high-quality, verified carbon credits. The bank is also discontinuing the purchase of unbundled renewable energy credits (RECs). Since 2019, BofA has been installing onsite solar panels, securing long-term agreements for wind and solar energy, and completing off-site financial deals to advance its sustainability objectives.
Through its Environmental Business Initiative (EBI), the bank has allocated $145 billion to low-carbon sustainable projects since 2007, with a commitment of an additional $300 billion allocated through 2030.
### Industry-Wide Focus on Sustainability
Bank of America is not alone in its shift toward sustainability. In December 2019, a coalition of 631 institutional investors managing over $37 trillion called on governments at the UN Climate Conference (COP25) to intensify efforts to address climate change and fulfill the Paris Agreement.
Leading asset manager BlackRock, which oversees $7.4 trillion, is also making substantial commitments to climate initiatives. CEO Larry Fink highlighted in his recent letter to CEOs that the mounting evidence of climate risk is prompting a reevaluation of fundamental financial assumptions.
However, industry discussions indicate that sustainability commitments often have a financial motivation, as underscored by Goldman Sachs CEO David Solomon’s announcement of a $750 billion investment in sustainable finance over the next decade. He noted that taking action on these issues not only fulfills a critical need but also presents a compelling financial opportunity.
Technology firms are playing a pivotal role in driving both discussion and action on sustainability. Microsoft, for instance, plans to be carbon negative by 2030 and has introduced a Sustainability Calculator for Azure services. The company has also established a $1 billion Climate Innovation Fund aimed at developing carbon reduction and removal technologies, pledging to retroactively eliminate its carbon footprint since 1975.
Online payment company Stripe is similarly committed, investing at least $1 million annually in carbon-negative solutions focused on advancing carbon capture and sequestration technologies, primarily developed by startups.
### Challenges in Implementing Consistent Strategies
At a recent World Economic Forum in Davos, Citibank CEO Mike Corbat stated that banks should not dictate corporate climate responsibilities by withholding financing from polluting enterprises. He emphasized the supportive role banks should play within their communities rather than impose standards.
In contrast, Microsoft President Michael Smith argues that those able to act swiftly should lead the charge toward net-zero goals.
While regulatory frameworks like the European Securities and Markets Authority’s Strategy on Sustainable Finance and the European Green Deal are emerging, a lack of consensus on key issues such as reporting standards and ESG investing hampers effective implementation.
This is a concern for institutions like Bank of America, which strive to improve climate-related disclosures and transparency through shareholder analysis and adherence to guidelines such as the Global Reporting Initiative (GRI). However, the GRI represents just one of numerous standards promoting proactive climate action, creating challenges for achieving uniformity and comparability across the industry.
As Bank of America CEO Brian Moynihan noted, harmonizing UN Sustainable Development Goals would streamline efforts and reduce conflicting measurements among various targets.