As banks feel the heat on climate change, PNC chief executive pushes back

Banks are under increasing pressure from investors, lawmakers and regulators to change various business practices in a bid to fight climate change and inequality, but an outspoken industry leader resisted forcefully on Thursday.

In remarks at the industry conference, PNC Financial Services Group CEO Bill Demchak argued that it is inappropriate to rely on criticism of Wall Street rather than make broader policy choices on social and environmental issues.

“Political football that has become banking, as a way to cause social change, because our politicians don’t have the backbone to actually do what they want to do, or be loud about it, is bullshit –,” Demchak said. .

“Trying to embarrass people of certain exposures for social reasons without a plan, without a great plan on the other hand to actually cause change, is insane,” said PNC Chief Executive Bill Demchak.

“Other people who want to throw stones should look in the mirror and find out how good they are before they throw stones at the banking industry,” he added.

Demchak’s comments, which he made in response to a question about whether banks could improve their environmental, social and governance scores with investors, come amid debate about how far banks should go to cut financing for the fossil fuel industry, and whether financial regulators should go further. have to take climate change taken into account in their oversight of the industry.

Climate activist of the year introduce new shareholder proposal in some banks to try to pressure executives to limit their energy lending.

In pushing back Thursday against the pressure, Demchak took particular aim at new Securities and Exchange Commission requirements around disclosure and other agencies’ climate stress tests, saying that larger proposals on the issue are gathering dust.

“For the banking system, this is a real climate change problem for a country that we need to transition to, but our policies to do that are terrible,” Demchak said in remarks at the Bernstein Strategic Decision Conference in New York.

“Trying to embarrass people from certain exposures for social reasons without a plan, without a great plan on the other hand to actually cause change, that’s crazy.”

Following Demchak’s remarks, a PNC spokesman did not respond to questions about whether the bank would direct political donations from certain MPs that have withheld broader plans to tackle climate change.

The $541 billion asset bank, for example, donated funds to the Rep. Barry Loudermilk, R-Georgia, who has in the past supported a bill to abolish the Environmental Protection Agency, and has supported former President Donald Trump’s decision to withdraw from the Paris climate accord.

Demchak also defended PNC’s record on social issues, noting that the Pittsburgh bank was one of the few to promise $1 billion to combat systemic racism following the murder of George Floyd and the social unrest that followed.

In addition, Demchak appointed PNC for $88 billion investment deal with a community advocate regarding the bank’s acquisition of the US BBVA unit in 2021. And he says that PNC is making other changes, such as positioning mortgage brokers in low-income areas.

On economic matters, Demchak warned of the risks facing consumer-focused lenders, saying Americans may now be squeezed out of very high inflation and a potential recession.

“I thought there would be trouble,” said Demchak. “On the consumer side, we have a lot of startups, they still rely on untested securitization and underwriting, and a lot of them are about to explode.”

Other banking executives this week have been trying to forecast potential problem areas in a scenario where the economy staggers into recession.

John Turner, CEO of Regions Financial with $164 billion in assets, told another industry conference Wednesday that the Birmingham, Alabama bank had downgraded its loans to energy companies, and allowed its restaurant loan portfolio to blur.

“We oversee senior housing, office space, retail,” Turner added. “But then again, those things seem to be performing pretty well, and we’re feeling fine with them.”

Turner said he doubted that a recession was inevitable, based on a review of the bank’s portfolio for signs of trouble that have historically been a precursor to a slowdown.

Demchak, however, warned that there could be “some volatility and credit-stressed prices as defaults escalate and drills take place.”

“History repeats itself. It’s not a question of whether it will happen,” Demchak said. “It will happen.”

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