Dealflow | April 19, 2018

Hewlett Foundation aims to activate retail banks for climate action

Jessica Pothering
ImpactAlpha Editor

Jessica Pothering

ImpactAlpha, April 19 – Most efforts to mobilize capital to meet global climate goals focus on the two ends of the capital spectrum: early-stage investments for promising technologies, or financing from pension funds and other large institutional investors for utility-scale projects.

But much of the financing that’s required, such as solar-panel installations, energy-efficiency retrofits and green-building development has to come from old-fashioned commercial banks, the kind that leverage customer deposits to make loans.

At least $1 trillion is needed annually to achieve the Paris Climate Accord targets by 2050. Meanwhile, there’s $12 trillion sitting in bank accounts in the US alone.

“That’s being ignored,” says Marilyn Waite of the William and Flora Hewlett Foundation. “A lot of people feel like they can’t do anything about such a big global problem, but they can literally just open that bank account.”

As part of Hewlett’s $600 million, five-year commitment to addressing climate change, the foundation is looking for models and concepts to accelerate environmentally sustainable consumer banking. It’s the first initiative of a $20 million philanthropic portfolio that aims to mobilize private sector finance for climate action.

Hewlett has issued a request for proposals to identify both supply- and demand-side approaches to sustainable banking. Options might include divestment from fossil-fuel projects, increased investment in renewables or campaign to spur customer demand for sustainable banks and climate-friendly banking options.

“Banks respond to consumer and market demand,” Waite says. The foundation aims to deploy the first $1 million in grants this year. One goal will be to encourage investors to think more critically about their own retail banking choices. “That’s low-hanging fruit. Impact investors all have retail banks,” Waite told ImpactAlpha.

Walking the talk

To that end, Hewlett Foundation intends to lead by example. “We are looking at our own banking practices, learning from the field on sustainable practices, figuring out how we can support the work to improve the sector,” said Larry Kramer, the foundation’s president. “We are open to new models and practices ourselves.”

The Hewlett Foundation’s commercial bank is JPMorgan Chase, which last year committed to facilitate $200 billion in clean-energy financing by 2025. CEO Jamie Dimon is a proponent of the 2015 Paris climate accord, which President Trump has vowed to exit.

But JPMorgan is facing criticism from shareholders who have questioned its financing of oil-sands producers and pipeline companies (to the tune of $8.4 billion from 2014 through last year, according to a shareholder resolution). The bank has resisted even putting the shareholder resolution to a vote (other companies have made similar requests to the Securities and Exchange Commission).

“Our new work seeks to persuade banks to adopt sustainable banking practices. That will include our own banks,” Kramer told ImpactAlpha. “But this is a relatively new idea and new front in climate advocacy. We are not calling for boycotts or seeking to demonize retail banks.”