When companies calculate their carbon footprint, they start with their own operations: electricity used in offices or factories, or gas for company vehicles. Then they look upstream at their supply chain, and downstream at emissions produced when customers use their products. But that approach leaves out a source of emissions that, for some companies, could exceed all the rest put together: the money in their corporate bank accounts.
Banks use their clients’ deposits to make loans, and since 2015 global banks have lent at least $4.6 trillion to fossil fuel companies. That’s why for some corporations—especially those whose products are not especially carbon-intensive on their own—choosing a bank can be one of the most consequential environmental decisions to make, according to a May 17 analysis by three nonprofit advocacy groups that focus on climate action in the financial sector.
The analysis focused on 10 top tech companies, all of which have been at the forefront of pursuing ambitious decarbonization agendas. If financed emissions were counted in the companies’ carbon footprints, they would account for, on average, nearly half of the total in this group, the analysis found. When it came to PayPal, Disney, Meta, and Google—companies with relatively small direct carbon footprints and a lot of cash—financed emissions were greater than other carbon-footprint contributors combined.
For now, financed emissions are not counted by the companies or by clearinghouses like the Carbon Disclosure Project, through which companies can report their emissions. Quartz reached out to each of the 10 companies cited for a response, but only heard back from Salesforce by publication time. Patrick Flynn, Salesforce’s global head of sustainability, said the report’s methodology seems sound.
“Financial supply chains can be just as important as other supply chains,” says James Vaccaro, executive director of the Climate Safe Lending Network and the report’s lead author. “[These companies] are all racing to zero with the hand brake on, because they’re indirectly investing in the things they’re trying to fight against.”
The May 17 analysis focuses on cash holdings and securities as reported in the companies’ financial disclosures. It excludes financial instruments like private equity investments and retirement funds for which fewer data are publicly available. To convert these to emissions, the dollar figures were multiplied by an approximate carbon intensity rate for commercial lending by US banks, calculated by the climate consulting firm South Pole. That rate is about 126,000 metric tons of carbon dioxide per billion dollars, roughly equal to the annual emissions from 27,400 cars.
The results of the analysis are inexact, because companies don’t disclose which specific bank or banks they use, and individual banks don’t report the carbon intensity of their lending. But they’re close enough to indicate at least the scale of these hidden carbon footprints, especially since companies are sitting on a record volume of cash and banks are moving slowly to cut their emissions.
“In that shortcoming there’s power,” Flynn said. “Any organization that knows they’re taking above-average action are going to be motivated to continue to refine their own data and deepen the methodology such that it better reflects their leadership.”
Corporations should leverage their influence with their banks to advocate for more complete disclosure of fossil fuel financing and a faster transition away from it, Vaccaro says—or be ready to put their money somewhere else. “Banks are committing to net zero, but they need a clear customer demand signal—the more they can get that, the faster they can go.”