We got another one. On Monday evening, Bank of America said that it will no longer finance fossil fuel exploration in the Arctic, joining Goldman Sachs, Morgan Stanley, Chase, Wells Fargo, and CitiBank, which all announced similar policies this year. That means no major U.S. bank will fund oil and gas production in the region anymore.
The news follows years of public pressure from climate organisers for companies to stop enabling Arctic drilling. The movement heated up since last fall when a coalition launched Stop the Money Pipeline, a campaign to call out Wall Street firms’ role in particular.
Bank of America’s decision came at a crucial moment. Just two weeks ago, the Bureau of Land Management announced plans to issue a request for nominations on the Arctic National Wildlife Refuge’s pristine 1.6 million acre coastal plain, letting energy companies suggest which pieces of the protected land should be auctioned off for extraction. This will be a big step toward solidifying leases before the end of Trump’s presidency. But those leases represent a major threat to threatened wildlife in the area, as well as local Indigenous people such as the Gwich’in Nation who have been instrumental in getting banks to turn against drilling. Financial firms’ ban on funding drilling there also shows that for oil companies, they may not be a worthwhile investment.
“The Trump administration has never even pretended to care about the Indigenous communities whose human rights would be threatened by the destruction of the coastal plain, but major financial institutions are listening to us,” Gwich’in Steering Committee Executive Director Bernadette Demientieff said in an emailed statement.
It’s unlikely Bank of America is doing this for purely altruistic reasons. Amid the covid-19 pandemic, oil and gas prices have fallen to historic lows, meaning banks aren’t expecting big returns on oil and gas. Climate organisers have also made it clear that they’ll give any energy company and any banks who finance them hell if they choose to buy coastal plain leases, which is a huge hassle. But whatever its reasons, Bank of America’s announcement is a good thing for the Arctic and for the climate.
With major banks out of the picture, oil and gas companies could still look to smaller financial institutions, such as private equity firms, to fund their Arctic oil and gas development. But that wouldn’t exactly be a safe bet.
“Private equity often expects a really quick return on their investment, like full returns within three to five years maximum,” Ben Cushing, a senior campaigner at the Sierra Club, said. “They also tend to charge higher interest rates.”
In August, a financial analyst at Rystad Energy told CNN that breaking even on Arctic oil would likely require it to cost between $US80 ($109) and $US85 ($116) per barrel. But the cost of a barrel right now is around $US40 ($54).
“So if drillers face a higher cost of financing, I think that that could potentially [deter] some of them from going forward, especially because Biden, when he gets into office, has pledged to do everything he can to prevent drilling in the Arctic Refuge,” Cushing said.
Though this is a big win, organisers aren’t stopping their campaign to celebrate. Right now, the Sierra Club, Gwich’in Steering Committee, and other environmental and Indigenous rights organisations are preparing comments to submit to the Bureau of Land Management on their call for input on leases. Groups are also continuing to pressure banks, asset managers, insurance companies, and even public relations firms to stop supporting fossil fuel expansion not only in the Arctic but anywhere.
“We will never stop fighting to protect the sacred calving grounds from destructive drilling, and we will prevail,” Demientieff said.