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Community Perspective

Banks made the right decision on Arctic oil

The June 16 letter from our congressional delegation to national financial leadership suggesting that major investment banks are discriminating against Native communities by deciding not to invest in Arctic oil projects is embarrassing. It is sad to see them use Alaska Natives as pawns in their efforts to promote this development. There is no question that Alaska will struggle without future oil extraction, but suggesting that the decision of the banks to not loan monies for Arctic projects is discriminatory ignores reality.

For discrimination to take place, funding would need to be denied to some projects while other identical projects received loans. To prove discrimination against Alaska Natives, we would need to see specific refusal to lend because recipients were Alaska Native. There is no evidence of such discrimination. Those Alaska Natives, including some on the North Slope, who do not support expanded drilling probably do not feel discriminated against at all.

The banks clearly state their policy for future investment within the larger context of corporate social responsibility. The policies encompass the entire Arctic, not just Alaska. Lloyd’s of London includes both the Arctic and Antarctic as no-go zones for support. Policies indicate an increased awareness from the banks about the long-term global risks of climate change and the costs that will accrue in dealing with it. They are making decisions after acknowledging the science. Here is what three banks have to say:

Citibank: “Citi views climate change as a central challenge facing our global society and economy in the 21st Century.” And “Citi has been unwavering in our public advocacy in support of governmental efforts to address climate change, such as the Paris Agreement. Our public engagement goes back to our first Climate Position Statement published in 2007.” And, “Citi has not previously provided and will not provide project-related financing for oil and gas exploration and production in the Arctic Circle.” (Environmental and Social Policy Framework, April 2020)

Wells Fargo: “Wells Fargo believes that climate change is one of the most urgent environmental and social issues of our time.” And, “Wells Fargo is a provider of financial services for customers in nearly every sector of the economy, and we do not believe it is appropriate that we limit credit or financing to legally operating companies based solely on public opposition to that sector… risk management is at the core of our business, and we look at the full spectrum of risks and various other factors when considering whether or not to finance any sector, company, or project-specific transaction.” And, “Wells Fargo does not directly finance oil and gas projects in the Arctic region, including the Arctic National Wildlife Refuge (ANWR) – part of a larger 2018 risk-based decision to forego participation in any project-specific transaction in the region.” (Wells Fargo’s Positions on Select Issues and Industries with Elevated Environmental or Social Risk.)

Morgan Stanley: “Morgan Stanley recognizes that global sustainability challenges, including human rights, resource scarcity and climate change, can result in significant impacts if left unaddressed.” And, “We believe that our approach to environmental and social issues helps us pursue our principal focus of creating long-term value for our shareholders and serving the long-term interests of our clients.” And, “We will not directly finance new oil and gas exploration and development in the Arctic, including the ANWR.” (2020 Environmental and Social Policy Statement)

Apparently our lawmakers have forgotten that these banks are businesses with shareholders. All such businesses are expected to make wise investments that provide shareholder returns and do not jeopardize shareholder value. If a bank decides, for various reasons, including reputational risk, that an investment is too risky, then they have a duty not to engage. Banking practices that ignored this duty led to the financial collapse in 2008.

Surely our lawmakers are not suggesting the 2017 opening of ANWR imposed a requirement on banks to lend money for Arctic drilling projects? Will they also demand that companies bid on leases when they are offered? When Congress forces businesses to ignore their fiduciary duties and invest against their professional judgment, we will no longer have much free market capitalism left in this country.

Rather than accusing banks of discrimination, our delegation could better spend time developing financial mechanisms where Alaska might be paid to keep oil and gas in the ground and the money in-state, similar to those used to maintain timber stands. Allow bright, educated young Alaska Natives to tell us themselves where discrimination exists. Our planet’s survival requires that we move away from fossil fuels, and the banks know this.

Jenny Bell-Jones is chair emeritus of the Department of Alaska Native Studies and Rural Development at the University of Alaska Fairbanks. This work represents her opinion and not that of the department.

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