Banking giant JP Morgan under fire as investigation reveals misleading practices: 'Likely to deceive the average consumer'

Banking giant J.P. Morgan is known for promoting "sustainable" investing funds, marketing itself as a responsible financial steward as it identifies environmental, social, and governance issues that present "the most significant long-term risks and opportunities to our investments." 

However, an investigation by the Bureau of Investigative Journalism, Daily Maverick, and news website Voxeurop has placed the company's claims under scrutiny, as reported by The Guardian. 

What's happening?

The investigation found that J.P. Morgan has more than one of its "sustainable" funds invested in Glencore, a London-listed commodity trader criticized for its coal operations in South Africa. 

The reason for this may be a loophole from the bank specifying that in order for a fund to be sustainable, at least 51% of investments must have a positive environmental or social impact. 

This allows J.P. Morgan to invest the other 49% however it pleases. The bank also gives a pass to companies that earn more than 20% of their revenues from thermal coal extraction. 

Jakob Thomä, chief executive of Theia Finance Labs, suggested to The Guardian that J.P. Morgan's business practices could amount to greenwashing, or making consumers believe their investments are more eco-friendly than they actually are. 

"The overwhelming majority of retail investors, in my view, would feel misled if they knew that was the ­criteria for labelling something as a sustainable fund," Thomä told the publication, adding that J.P. Morgan could be breaking European Union laws that prohibit any commercial practice that "deceives or is likely to deceive the average consumer."

Why is this important? 

While trade bodies such as the World Coal Association have tried to rebrand the industry as being part of a more sustainable future, the fact remains that coal is the dirtiest fuel around. 

According to Our World in Data, the death rate associated with air pollution and accidents from coal is 1,230 times higher than that of solar, the world's cleanest and safest source of energy. 

In South Africa, water and sanitation officials have accused Glencore — which operates three mining facilities near Phola, Mpumalanga — of failing to adhere to environmental laws at its Tweefontein coal mine, threatening public health after contaminating a local river, improperly storing hazardous waste, and letting sewage facilities fall into disrepair, per The Guardian.

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"Most of the people, when they do drink this water they get stomach aches," said Daisy Tshabangu, who moved to Phola with her family because of their work in the coal industry. 

Nonetheless, unemployment in the area is high, and Tshabangu told The Guardian that she didn't see a benefit to the mines. "It seems like we are being sidelined as a community," she said. 

What's being done about this?

For its part, Glencore says that its water treatment plant in Phola helps demonstrate its "commitment to sustainable development," as reported by The Guardian. However, it also refused to comment on or take direct responsibility for the community's water quality.

This comes after the South African water and sanitation department ruled that Glencore's Tweefontein mine had failed to clean up its operations after multiple requests to do so.

Local campaign groups such as the Federation for a Sustainable Environment are now pushing for regulators to hold polluting companies accountable for their actions. 

"Our regulators are often compromised and give in to the pressure of the coal mining industry," said FSE CEO Mariette Liefferink, who has also written to J.P. Morgan asking the bank to reconsider its investments in Glencore — the world's fifth-biggest coal miner. The Guardian reported that J.P. Morgan refused to comment on the matter. 

Ultimately, while a number of major banks are reducing their commitments to sustainability, you can participate in a cleaner tomorrow by supporting investments in clean industries. Carbon Collective is one resource with information on green investing, from emerging tech to renewable energy.   

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