The San Francisco skyline against a backdrop of smoke and haze from wildfires. Photo credit: Adobe Stock
By Jamie Buell,
News outlets and social media have recently been flooded with headlines in recent weeks about New York City having the worst air quality in the world due to smoke from unprecedented Canadian wildfires swirling across the northeast. The amount of land in Canada that has burned is 13 times greater than the 10-year average. This season’s record-level wildfires across the entire country is a direct result of record-high temperatures coupled with prolonged drought conditions, a trend we’ve seen only heightened year after year as climate change intensifies.
As someone who was born and raised in Southern California, the conditions New York City is experiencing is something I, and other native Californians, are unfortunately familiar with. But east coasters certainly are not. They should not be experiencing this. And Californians should not be so accustomed to it.
Experts note that these anomalous conditions point to clear symptoms of the climate crisis. The root cause of these symptoms is our oil and gas-dependent economy, and banks are at the center of this.
Banks are perpetuating a cycle of harm to the communities they are supposed to serve through their participation in the oil and gas industry. Despite decades of scientific warnings and weak net zero policies and commitments, banks continue to finance climate chaos and fuel (pun intended) our economic dependency on oil and gas.
At our recent webinar, “California Communities and Climate Resiliency”, April Merleaux, one of the authors of Rainforest Action Network’s annual Banking on Climate Chaos report, noted Royal Bank of Canada as the worst financier of fossil fuels, knocking JP Morgan Chase out of the top spot, which it has held since 2019. The bank provided $41 billion in financing to fossil fuel companies in 2022, and its results are being played out in the bank’s own backyard.
The legacy of redlining has become more than just devalued neighborhoods or housing discrimination
In the states, formerly redlined communities, communities of color and low-income communities are paying the price of fossil fuel financing in both their health and in their home values and mortgages. For instance, a study from the National Community Reinvestment Coalition (NCRC) found that formerly redlined communities have lower life expectancy than their white counterparts. What could be a potential cause for this? Formerly redlined communities have a higher density of oil and gas wells in their neighborhoods, some twice as many as their white counterparts.
The Wilmington Neighborhood in Los Angeles– a community that is 96 percent Latine/x–– has the largest concentration of oil refineries in California, and one in three households report cancer compared to the national average of one in 10. Not only did banks originally perpetrate discriminatory home lending through redlining, but now they are contributing to disparate health outcomes for communities already disenfranchised.
These socioeconomic trends in communities of color – lower life expectancy, a higher concentration of oil and gas wells and refineries, and higher risk of climate change-related disasters like wildfires and flooding – have been funded and upheld by banks and yet these institutions punish these frontline communities further. Studies by the Federal Reserve have found banks have reduced lending to frontline communities faced with high flood and wildfire risk – especially among borrowers with lower credit scores.
Banks are perpetuating a cycle of harm to the communities they are supposed to serve through their participation in the oil and gas industry, continuing a long history of wronging communities and families of color. Whether it be the industry’s discriminatory home lending practices like redlining, disproportionate bank branch closures in communities of color, or underserving small business owners of color, the financial industry’s support of oil and gas and its outsized impact on communities of color are continuing a legacy of structural racism. Banks have a responsibility to not only divest from fossil fuels but reinvest in vulnerable communities to build climate resilience.
Banks, Regulators must prioritize building climate resiliency in communities that have been hardest hit by climate change
A transition to a green economy and sustainable future is necessary for all communities – but especially those on the frontlines of climate change – to gain greater economic opportunity and build the community wealth they are owed. Within this transition, however, banks and governments must ensure that the financial burden does not fall on vulnerable populations. Speaking at our climate change webinar, Alex Martin, Senior Policy Analyst for Climate and Finance at Americans for Financial Reform, outlined a few ways federal agencies can help accomplish this. First, the US Securities and Exchange Commission can require climate disclosures from banks and require transparency around net zero transition plans. Second, the Federal Reserve can monitor community investment in climate resilience to ensure vulnerable communities are protected from disinvestment. And, finally, the Department of Treasury can protect consumers’ access to insurance.
The connections between the legacy of redlining, discriminatory and predatory banking, fossil fuel financing and equitable community development are clear. These intersections are why we are increasing our advocacy around bank accountability in fossil fuel financing and building climate resiliency.
One such way is through our climate cohort, in which Rise Economy members and allies investigate corporate accountability for fossil fuel financing and equitable green investments. It must be a priority of all actors – banks, government agencies, and community groups – that frontline communities who have been continuously wronged and excluded from the financial sector are prioritized in the fight to build back better from the climate crisis we are challenged with today. Our communities shouldn’t have to live through other climate-related disasters.