Is JP Morgan overstating its CSR credentials?
Updated: May 14
Created in collaboration with LSE Green Finance Society
JP Morgan is the world’s 5th largest bank. The bank has recently made substantial commitments toward sustainability, diversity and inclusion. While this is undoubtedly a step in the right direction, the true effects of the bank’s commitment are nowhere near where they need to be. We find that JP Morgan’s initiatives do not align with Net Zero transition goals, indicating that much more has to be done by the bank.
Banks play an integral role in our economy, and their duty to uphold corporate social responsibility is crucial. With the effects of climate change becoming more apparent, banks have an increasingly important role to play in combatting climate change. In addition, to comply with modern employment and ethical banking standards, banks have to improve employment and governance practices to ensure diversity and inclusion in their workforce, as well as accountability for the clients that they work with. Amongst financial institutions, JP Morgan stands out as it remains the world's most systemically important bank in 2022. This article will examine JP Morgan’s efforts in the areas of sustainability, employment practices and governance.
Sustainability
Having been the world’s number one banker of “climate chaos” with a total of $380 billion in lending and underwriting to the fossil fuel industry from 2016 to 2021, JP Morgan joined the Net Zero Banking Alliance in 2021, committing itself to achieve net zero by 2050. It has also set targets for its oil and gas, and power portfolios to be achieved by 2030 and committed US$1 trillion towards financing green initiatives.
JP Morgan has chosen carbon intensity as its metric for measuring its progress towards its sustainability goals. However, the bank finances 18 out of 25 companies that are set to expand gas production and have no commitments to phase out coal. Carbon intensity pledges give companies a framework to continue expanding production in dirty fuels if they also invest in pollution-capturing technology. While this may incentivise the development of cleaner technologies, it enables companies to continue using carbon-intensive energy sources. Hence, committing to reducing carbon intensity is a directional goal that is not as impactful as an absolute one and allows pollutive companies to continue greenwashing. In the upstream oil and gas sector, the bank does not require its clients to stop expanding as a precondition for receiving financing. As a result, since the signing of the 2015 Paris Agreement, JP Morgan has financed 46 of the 60 companies with the biggest plans to expand upstream oil and gas. The lax guidelines that JP Morgan has set mean that it continues to finance clients that contribute significantly to increased pollution.
JP Morgan's sustainability practices fall short in comparison to other banks. While JPMorgan is targeting a 69% overall reduction in carbon intensity in its electric power portfolio, it includes no explicit coal requirements. These new targets accompany an existing prohibition on financing new coal-fired power plants. In contrast, other global banks, like Citi, have hard timelines for phasing out relationships with coal companies. Downstream in the coal mining sector, the bank has committed to not having relations with firms that derive more than 50% of their revenue from coal. This is a high threshold and enables the bank to fund pollutive companies such as Glencore, which has plans to expand its coal mining in Australia. Again, by prioritising its margins, JP Morgan supports firms' decisions that worsen pollution.
Conclusively, JP Morgan has increased its efforts toward sustainability. However, its targets for pollutive industries are far from sufficient for a bank of its size. There remains a role for fossil fuels in a low-carbon world. Further, the immense reliance the world has on fossil fuels also makes fast, impactful switches away from fossil fuels difficult. Nonetheless, given the speed at which the world has to hit net zero, JP Morgan, being one of the world's most influential banks, must make a greater effort to shift the world towards a more sustainable future.
Diversity and Inclusion
JP Morgan’s history with inclusivity and diversity has been turbulent. Having pledged $30 billion to initiate more diversity within its workforce and to minimise the racial inequalities within its business practices, the company has alluded to an impression of diversification. However systemic faults and a toxic workplace have exposed the dark side of the corporation’s culture. While JP Morgan has been showing consistent improvements in diversity, with women making up 52% of the US workforce (a 2% increase from 2020), racism and discrimination within JP Morgan seem embedded within its workplace culture. The bank has been hit with numerous lawsuits concerning racism and gender discrimination. For example, in 2018, a group of 6 black financial advisors filed a class action lawsuit alleging they were systematically disadvantaged by lower pay, fewer clients and less support than their equivalent white colleagues during their tenure at JP Morgan. In 2020 and 2022, more employees filed lawsuits alleging low income and a hostile work environment due to gender discrimination. To further suggest systemic issues within the workforce, anecdotal witness testimonies from employees point towards the lack of accountability and duality within the company, where it promotes diversity yet discards responsibility for protecting harassed employees.
Discrimination lawsuits against JP Morgan point towards the same problem: a toxic work culture in which minorities are subject to immense discrimination and false accusations and where no one within the corporate hierarchy is willing to help the victim or support them. If JP Morgan wants to change and improve its workplace diversification, it must be held accountable for workplace discrimination and transform its workplace hierarchy so that people at the highest levels of the company will ensure inclusivity.
Conclusion
Despite being a corporate powerhouse, JP Morgan's CSR efforts are grossly insufficient. In their bid for profitability, JP Morgan has allowed itself to exacerbate the climate crisis by continuing to fund big oil. External scenarios such as geopolitical conflict may hinder the bank's ability to step up its efforts. However, given its size and influence, JP Morgan has to be the one leading the charge. Although they have committed over $30 billion to inclusion and diversity within client relations and the workforce, JP Morgan has been exposed to numerous lawsuits highlighting the systemic racism and discrimination within the company.