April 29, 2005
JPMorgan Chase Environmental Policy Triggers Tipping Point for US Bank Sustainability
by William Baue
The JPMC policy surpasses environmental best practice established by Citigroup and Bank of America
in some areas, but also lags these sustainability leaders in others.
Earlier this week, JPMorgan Chase (ticker: JPM) released a comprehensive env
ironmental policy that follows in the footsteps of Citigroup (C) and Bank of America (BAC) and even takes
further strides. For example, JPMC not only adopts the Equator Principles (as did Citi and BofA), but also
extends them beyond project finance to cover all loans, debt and equity underwriting, and even
financial advisories, among other areas. And while the Principles apply to $50 million projects and
up, JPMC will apply the principles starting at $10 million for financing of the extractive
industries, such as oil and gas, forestry, and mining. In some areas, however, JPMC's policy falls
short of commitments in Citi and BofA environmental policies.
Taken together, the
three sets of environmental policies tip the sector's scales away from environmental
irresponsibility and toward sustainable environmental stewardship.
"JPMorgan Chase's move
represents a tipping point in the private financial sector, where the three largest banks have now
publicly recognized that a sound long-term economic strategy relies on embracing environmental
sustainability," said Ilyse Hogue, global finance campaigner for Rainforest Action Network (RAN), a nongovernmental organization (NGO). "The
rest of the commercial and investment banks need to taker larger strides to confront their role in
the environmental crisis facing us."
RAN employed sometimes-dramatic tactics to encourage
Citi and BofA, and then JPMC, to develop comprehensive environmental policies. For example, last
month's plastering of "wanted" posters of JPMC Chief Executive William Harrison in his Greenwich,
Connecticut neighborhood led to arrests of three RAN campaigners. RAN upped the ante on its
advocacy after the bank postponed its self-imposed commitment to implement an environmental policy
from October 2004 to April 2005.
While the tactics obviously kept the pressure on the
company to make good on its promise, JPMC's work proceeded at the pace necessary to produce good
"The tactics weren't going to speed up or slow down our progress of developing the
policy--in fact, speeding up the process and announcing a policy quickly that wasn't fully
thought-through could have had a negative effect on the potential success of our policy," said Amy
Davidsen, JPMC director of environmental affairs. "I think its important to point out that we went
through one of the biggest banking mergers ever, ultimately forming the third largest bank in the
JP Morgan Chase and Bank One completed their merger in July 2004.
that we only took 7 months to produce a firm-wide policy after such a large-scale merger is quite
extraordinary, considering the amount of businesses we needed to evaluate," Ms. Davidsen told
SocialFunds.com. "We listened to a number of constituents and shareholders, who helped us in the
Such engagement with shareholders, which helped instigate Ms. Davidsen's
appointment and the development of the environmental policy, dates back to the 1998 formation of a
shareholder dialogue group to promote environmental responsibility across the financial sector.
The group comprised Christian Brothers Investment Services (CBIS), F&C
Asset Management (formerly ISIS and before that Friends, Ivory & Sime), Trillium Asset Management, Domini Social Investments, and the Green Investments Program of Friends of the
In 2000, Trillium filed a
shareholder resolution asking JPMC to assess environmental and social criteria in its business
decisions that received 6.4 percent support. In 2003, CBIS served as the lead filer of a similar
resolution (co-filed by Domini and Trillium), and Julie Tanner, CBIS's corporate advocacy
coordinator, re-invigorated dialogue with the company.
"Once we filed that second
resolution, their Corporate Secretary Tony Horan was very responsive to our concerns," said Steve
Lippman, senior analyst at Trillium. "As part of negotiations in which we withdrew our resolution,
the bank created the Office of Environmental Affairs almost exactly a year ago, and Amy Davidsen
has also been very responsive to our concerns."
Comparing the three environmental
policies reveals that JPMC surpasses Citi and BofA in many--but not all--areas. For example, JPMC
surpasses Citi and BofA by making explicit its preference for Forest Stewardship Council (FSC) as the most credible independent sustainable
logging certification system. BofA's policy on "No Go Zones" affords more protection to
ecologically sensitive forests, but JPMC's provides more clarity in its definition of how such
forests will be determined, according to Ms. Hogue.
"And while Bank of America and
Citigroup link their indigenous protections to intact forests and critical natural habitats
respectively, the JPMC policy decouples the support of indigenous rights from the type of ecosystem
in which these communities reside," Ms. Hogue told SocialFunds.com. "JPMC's well-articulated
support for the processes and decision making, while far short of the ultimate goal of Free and
Prior Informed Consent for all affected communities, still moves closer to the recognition that
human rights should not be conditional."
JPMC's goals for reducing its own direct
greenhouse gas (GHG) emissions falls between those of BofA's more ambitious and Citi's less
ambitious goals, but it sets neither targets nor timelines on the reduction of cross portfolio
However, JPMC distinguishes itself from Citi and BofA by committing to convene
an industry group to advocate for greenhouse gas reductions at the federal level.
day and age where our administration continues to tarry while ice caps melt, JPMC is willing to
take a leadership position in promoting the solutions the rest of the world has already embraced,"
said Ms. Hogue.
One issue that remains unclear is whether JPMC will continue to finance
RAN alleges that the building products distributor sources legally-disputed, undocumented timber
"We can't comment on client discussions, but our new policy says that we
will not finance companies or projects that are knowingly engaged in illegal logging," said Ms.
"We expect to see JPMC and other financial backers of BlueLinx promote a
solution-oriented approach to the company that assures legality of the wood products in question
from stump to store or to reevaluate their financial relationship," Ms. Hogue stated.