The CEOs of the six largest U.S. banks fielded questions on their policies concerning climate change and racial equity, facing heat from both Democrats and Republicans.
The fire from both sides in a Senate Banking Committee hearing Wednesday underscores the challenge that the largest U.S. banks face, as they publicly articulate their efforts to incorporate environmental, social, and governance (ESG) principles into their businesses.
Democrats allege that the large banks are not doing enough on green energy and narrowing the racial wealth and income gap.
But Republicans accuse the same firms of choosing which industries and companies they finance in order to score political points.
“The stakeholder capitalism, or the woke capitalism, seems to be running amok,” said Sen. Tim Scott (R-S.C.) after an exchange with Bank of America (BAC) CEO Brian Moynihan.
In March, Bank of America took aim at Georgia’s new voting law that the bank felt was at odds with its investments in addressing racial inequality. Wells Fargo (WFC), Goldman Sachs (GS), and Citigroup (C) CEO Jane Fraser signed a letter publicly criticizing the law, which among other measures, imposes stricter ID requirements for absentee ballots and threatens misdemeanor charges for those offering water to those waiting in line to vote.
Scott, who said that he does not find the bill discriminatory, bashed the banks for their position while Sen. Mark Warner (D-Va.) appeared to applaud the banks.
“Our company signed that letter based on input from our ESG committee and our teammates on how they felt when the law came in,” Moynihan told Scott.
A major effort among the large banks is shifting to a greener economy. In prepared testimony, the heads of all six testifying banks made mention of initiatives to net-zero financed emissions.
Republicans worry that the banks will deny financing to natural gas and fossil fuel companies, but JPMorgan Chase (JPM) CEO Jamie Dimon clarified in his prepared remarks that “abandoning fossil fuels is not an option right now.”
Senate Banking Committee Chairman Sherrod Brown (D-Ohio) argues that the banks are not aggressive enough on climate-related issues.
“They can’t say climate change is a threat to the entire economy, while dragging their feet when it comes to investing in new technology and the jobs of the future,” Brown said in a statement released after the three-hour hearing wrapped up.
The banks counter that the goal is to help those traditional energy companies fundamentally change their business models.
“Our goal is to support our clients responsibly and help them transition to cleaner energy, [and] create jobs in the future. This is going to require investing into new technologies,” Fraser told the committee. Citi has declined several projects related to coal power or mining, Bloomberg reported.
At Morgan Stanley (MS), the bank hopes to achieve carbon neutrality for its global operations by 2022.
Wednesday’s hearing marks the first time the six megabanks have faced the Senate Banking Committee in testimony. But the committee titled the testimony an “annual oversight” hearing, suggesting that the committee would like to make it a recurring event on Capitol Hill.
Brian Cheung is a reporter covering the Fed, economics, and banking for Yahoo Finance. You can follow him on Twitter @bcheungz.