Wells Fargo has become the latest major financial institution to set new greenhouse gas standards requiring borrowers in the energy sector to reduce emissions.
Oil and natural gas companies must reduce their absolute emissions by 26% by 2030, based on 2019 emission levels, Wells Fargo said last week. Other power sector businesses must see a 60% reduction during the same time period.
The new rules from Wells Fargo are part of a trend from financial institutions around the world to implement such climate regulations for its lending programs, joining the likes of Citigroup Inc. and the United Nations-convened Net-Zero Banking Alliance. The alliance is an industry-led coalition of banks from across the globe with the goal to align their lending and investments with net-zero emissions by 2050.
Republicans in Congress have sharply criticized pressure from climate groups and Democrats on U.S. financial institutions to limit their lending to fossil fuel companies amid high energy costs. Executives of major oil companies recently testified to Congress that mixed messaging from the Biden administration and regulators can lead to increased difficulty in securing financing for expensive production projects.
However, less than 10% of executives from 132 oil and natural gas firms surveyed by the Federal Reserve Bank of Dallas in March said a lack of access to funding was the primary reason they were restraining growth despite inflated oil prices.
In a statement unveiling the emissions reductions, Wells Fargo said it is an “important step” toward achieving climate goals and transitioning to a cleaner future.
“This is an important step in the company’s work to realize its goal of net-zero greenhouse gas emissions by 2050, including client emissions attributable to its financing,” the company said last week. “The company intends to reach this net-zero ambition by continuing to support and work with its clients and providing the capital needed to meet the demands of today while working to transition to a low carbon future.”