goldman sachs
No, Says Consumer Watchdog, Goldman Sachs Shouldn't Be Allowed to Sell Electricity
"It is highly concerning to see a large Wall Street bank enter a market known for its lack of consumer protection."
Federal regulators should not allow Goldman Sachs to become the first Wall Street bank to sell retail electricity contracts to U.S. households, a campaigner with Public Citizen argued Wednesday.
"Competitive retail electricity suppliers solicit households to sign contracts to provide electricity, often door-to-door," said Tyson Slocum, director of the consumer watchdog's energy program, in a statement. "The industry is known to frequently employ unfair and deceptive marketing and sales tactics, disproportionately impacting low-income communities, communities of color, and the elderly."
"It is highly concerning to see a large Wall Street bank enter a market known for its lack of consumer protection," declared Slocum, who also dove into problems with the competitive retail electricity industry and a related application to the Federal Energy Regulatory Commission (FERC) in a short essay.
The essay cites reporting from The Wall Street Journal as well as findings from the National Consumer Law Center and the Massachusetts attorney general that the "predatory" sector engages in greenwashing and problematic marketing strategies while saddling vulnerable people with higher utility bills.
"Key to Goldman's ability to make money from selling retail electricity to households is having a sizable financial power trading business buoyed by control over generation."
Industry issues are so bad, the essay notes, that Public Citizen joined with other advocates earlier this year in calling on the Federal Trade Commission to better protect consumer from misleading claims associated with home energy products.
Goldman Sachs is attempting to enter this troubling industry through a private equity firm that last month sought permission from FERC to make sales on behalf of Rhythm Energy—which, according to the application, is "a retail electric provider currently operating in Texas that is seeking to expand its business."
Slocum stressed Wednesday that "lawmakers have attempted to build a firewall between banks owning and controlling nonbank businesses. While Goldman is playing a game with shell corporations, there are very clear connections between Goldman Sachs, private equity firm West Street Capital Partners, and Rhythm Energy."
His essay details a "rent-a-director" scheme for shell companies and states that "Goldman Sachs—a bank holding company subject to regulatory oversight by the Federal Reserve—controls this private equity firm and is able to direct its holdings like Rhythm Energy despite the apparent conflict" with federal law.
"Key to Goldman's ability to make money from selling retail electricity to households is having a sizable financial power trading business buoyed by control over generation," the essay explains. "On October 24, FERC approved allowing Goldman Sachs to control GenOn's fleet of fossil fuel power plants out of bankruptcy (Avenue Capital Group, Prudential Financial, Graham Goldsmith's Cross Ocean, and Stone Point Capital-managed Trident Capital are the other firms controlling it along with Goldman)."
"While this push into selling retail electricity contracts to households appears to be the first by a Wall Street bank," the essay says, there are other examples from private equity firms and fossil fuel giants which show how "aligning control over wholesale markets with locking consumers into retail contracts can be lucrative."
The essay concludes that "Goldman Sachs clearly sees profits to be made selling American families electricity. The question is why the Federal Reserve is allowing Goldman Sachs to be in the business of marketing electricity to households."
As Slocum warned Wednesday, "Controlling both energy generation and building out a network of households that are contractually obligated to buy your energy is ripe for consumer abuse."
Analysis Details How Wall Street Underwriting Quietly Funnels Billions Into Fossil Fuels
"Underwriting is a huge missing piece of net-zero transition plans, allowing big U.S. banks to continue to help fossil fuel companies raise billions of dollars with limited scrutiny," said one campaigner.
A report out Monday sheds light on how big U.S. banks' underwriting of bonds and equities for polluting corporations constitutes a "hidden pipeline" for fossil fuel financing.
It's no secret that financial institutions play a leading role in driving the climate emergency. Since 2016, the year the Paris agreement took effect, the world's 60 largest private banks have provided more than $5.5 trillion in financing to the fossil fuel industry, flouting their pledges to put themselves and their clients on a path to net-zero greenhouse gas emissions as the window to avert the worst consequences of the intensifying climate crisis rapidly closes.
But banks' underwriting activities receive far less attention than their direct lending practices, even though both are instrumental in enabling fossil fuel expansion and must be reformed to rein in the industry most responsible for imperiling the planet's livability.
That's the key takeaway from a new analysis of Wall Street's participation in capital markets published by the Sierra Club's Fossil-Free Finance campaign.
"By only focusing on emissions reduction targets for their lending activities, banks are conveniently excluding half of their fossil fuel financing from their climate commitments."
"Banks play a vital role in capital markets," the report explains. "Acting as underwriters, they are the gatekeepers of fossil fuel companies: they advise companies issuing bonds and equities, hold the vital information on the issuer, and help market the instruments to investors disclosing only the necessary risk."
Since 2016, the six largest U.S. banks—JPMorgan Chase, Citi, Wells Fargo, Bank of America, Morgan Stanley, and Goldman Sachs—have provided more than $433 billion in lending and underwriting to 30 of the companies doing the most to increase fossil fuel extraction and combustion worldwide, the report notes. More than three-fifths (61%) of that financing comes from underwriting, with those half-dozen banking giants issuing $266 billion in new bonds and equities for the world's top 30 fossil fuel expansion firms.
Climate justice advocates have long criticized the concept of "net-zero" because, they argue, allowing planet-heating pollution to be "canceled out" via dubious carbon offset programs or risky carbon removal technologies is an accounting trick that doesn't guarantee the significant emissions cuts needed to avoid the climate emergency's most destructive impacts.
But even if one accepts the premise of net-zero, big U.S. banks' policies on the topic are misleading.
"Despite the importance of capital markets activities in helping fossil fuel companies secure new funding, banks focus primarily on lending, while downplaying the importance of underwriting, when setting their emissions reduction targets," the report says. "Banks are performing sleight of hand, distracting investors and regulators with net-zero transition plans that are half-finished, while continuing to funnel money to fossil fuel companies via capital markets with limited scrutiny."
In a statement, Adele Shraiman, senior campaign strategist with the Sierra Club's Fossil-Free Finance campaign, said that "without banks, fossil fuel companies cannot raise money through capital markets."
"By downplaying their role in capital markets and refusing to include facilitated emissions in their climate targets, big U.S. banks are intentionally sidestepping a major source of real-world emissions and making it impossible to meet their own net-zero commitments," said Shraiman.
According to the report: "Only three of the six major Wall Street banks include bond and equity underwriting in their sectoral emissions reduction targets—JPMorgan Chase, Goldman Sachs, and Wells Fargo. The remaining three banks have so far chosen to only apply emissions reduction targets to lending activities."
However, "even among those who have set emissions reduction targets that include underwriting, insufficient disclosures and lack of standardization make it difficult to understand how robust banks' facilitated emissions accounting methodologies are, and what progress they are making toward achieving their emissions reduction targets," the report adds.
In a blog post, Shraiman wrote that "banks don't want us to know all of the ways they help fossil fuel companies raise funds to continue building the pipelines, oil rigs, fracking wells, and coal mines that are destroying the climate and hurting communities."
"But investors, regulators, and customers around the world see through their duplicity," she continued. "We are demanding complete, robust, and transparent net-zero plans that cover all types of financing activities and will lead to real-world emissions reductions in line with our global climate goals."
"Banks don't want us to know all of the ways they help fossil fuel companies raise funds to continue building the pipelines, oil rigs, fracking wells, and coal mines that are destroying the climate."
Monday's report comes at a key moment in the fight to stop Wall Street from continuing to fund climate chaos.
As the Sierra Club observed, "Banks currently point to a lack of industry standards on underwriting to justify why they do not disclose or set targets for facilitated emissions." However, the industry-led Partnership for Carbon Accounting Financials is expected to release its updated methodology on accounting for and reducing facilitated emissions in the near future.
"Underwriting is a huge missing piece of net-zero transition plans, allowing big U.S. banks to continue to help fossil fuel companies raise billions of dollars with limited scrutiny," Shraiman said. "By only focusing on emissions reduction targets for their lending activities, banks are conveniently excluding half of their fossil fuel financing from their climate commitments."
"It's time," she added, "for the major Wall Street banks to adopt a robust and consistent methodology for accounting facilitated emissions, and take full responsibility for the climate impacts of their underwriting decisions."
The International Energy Agency has stated unequivocally that there is "no need for investment in new fossil fuel supply in our net-zero pathway."
After the Intergovernmental Panel on Climate Change released its latest assessment in March, United Nations Secretary-General António Guterres said that limiting temperature rise to 1.5°C is possible, "but it will take a quantum leap in climate action," including a ban on approving and financing new coal, oil, and gas projects as well as a phaseout of existing fossil fuel production.
Funding Poland LNG Project Would Break Another Biden Climate Promise, Warns Group
"If approved, this $500 million climate-wrecking handout would further threaten the air, land, and water of frontline communities in the United States and in Poland, making a mockery of Biden's purported commitment to environmental justice," said one campaigner.
Climate campaigners on Thursday said that within days, President Joe Biden's promises to end public finance for fossil fuel projects may prove empty if plans that the U.S. International Development Finance Corporation has indicated it has for an LNG project in Poland come to fruition.
The DFC, which oversees U.S. investments in development projects in lower- and middle-income countries, listed on its pending project list on May 23 a $500 million guarantee to support the Polish oil and gas company PKN Orlen to increase its liquefied natural gas (LNG) imports.
The pending transaction was listed ahead of the DFC's board meeting, which is scheduled for June 7.
Oil Change International (OCI) noted that the LNG listing was removed on May 30, but the "public information summary" remained live as of Thursday, suggesting the board could still approve the project.
The project, which would involve Wall Street firm Goldman Sachs helping the company to increase its imports, would be in direct contradiction to President Joe Biden's statement at the 26th United Nations Climate Change Conference in 2021 that his administration would end public finance for fossil fuel development after 2022.
"President Biden has cited his promise to end international public funding for fossil fuels as a sign of his ongoing commitment to climate leadership, even as he boosts fossil fuels and breaks many of his core climate promises at home," said Collin Rees, U.S. program manager at OCI. "The Development Finance Corporation approving this dirty project would show once and for all these claims are nothing but empty words."
"LNG is a false solution that will intensify the climate crisis and increase the world's dependence on fossil fuels."
LNG is gas that has been cooled and liquefied after being extracted by drilling or fracking. As Common Dreams reported in April, 116 climate action groups wrote to Biden ahead of the Group of 7 (G7) climate and energy meeting in Japan last month to warn that "the global LNG boom" must be stopped.
Campaigners say the continued expansion of LNG would harm communities that lie near fracking and drilling sites as well as LNG export terminals, while disregarding the warnings of scientists and energy experts who are unequivocal in their warnings that new fossil fuel extraction projects have no place on a pathway to keeping planetary heating under 2°C above preindustrial temperatures.
"If approved, this $500 million climate-wrecking handout would further threaten the air, land, and water of frontline communities in the United States and in Poland, making a mockery of Biden's purported commitment to environmental justice," said Rees. "A rapid buildout of 100% renewable energy is the only pathway to global energy security."
The DFC's potential approval of the project would mark the second time in less than a month that the Biden administration has agreed to finance new fossil fuel development. In May the U.S. Export-Import Bank approved nearly $100 million for the Balikpapan oil refinery in Indonesia.
U.S. Ambassador to Japan Rahm Emanuel also spoke at a recent Alaska Sustainable Energy Conference about a proposal for an 807-mile gas pipeline across Alaska and an LNG export terminal that he claimed would be in the United States' economic and national security interests.
"LNG is a false solution that will intensify the climate crisis and increase the world's dependence on fossil fuels," wrote Kay Brown, Arctic policy director for Pacific Environment, at Common Dreams on Thursday. "LNG is methane compressed and chilled to make it easier to transport. Methane emissions are 80 times more damaging to the climate than carbon dioxide, in the short term."
While Biden said at COP26 and at the G7 meeting that he is committed to ending public financing for fossil fuel projects past 2022, the White House has not released guidance outlining how that promise will be kept.
"Biden's refusal to publish public guidance upholding the international fossil fuel pledge is enabling DFC to keep funding dirty fossil fuel expansion," said Rees. "In removing this massive handout to the U.S. LNG industry from its pending project list, DFC is following Biden's lead and keeping ongoing fossil fuel support hidden from the public eye."