BofA Invests $50B for the Environment
Bank of America Corporation (BAC) is the latest to join the list of banks pledging finance towards environmental causes to develop alternative sources of power in order to ease pressure on the dwindling natural resources. The company has committed $50 billion to support environmental businesses over a 10-year period.
This ecological investment of BofA follows its earlier pledge made in 2007. This commitment will culminate in 2012, almost four years earlier than expected.
In April, Wells Fargo & Company (WFC) committed $30 billion towards environmental investments followed by a similar announcement by The Goldman Sachs Group, Inc. (GS), which invested $40 billion. Earlier in 2007, Citigroup, Inc. (C) also promised to allocate $50 billion to environmental causes over a 10-year period.
Of late, most of the banking giants have been facing tremendous problems practically on every front. Therefore, in order to repair their dented image, these banks have come up with the idea of investing in companies that address the most critical issues of climate change and vanishing natural resources.
BofA’s environmental investment plans include investment in renewable energy and infrastructure projects, as well as energy efficiency initiatives. Moreover, it would provide loans to purchase electric and hybrid vehicles along with assisting in building the infrastructure.
Further, this bank would focus on innovating new technologies aimed at managing water resources. BofA would also act as an underwriter for the initial public offerings of green companies. It plans to grant $100 million to non-profit organizations and company financial development institutions for promoting environmental issues.
Moreover, BofA has also decided to significantly reduce the carbon footprint of its own operations by 2015. The bank aims at reducing energy, water and paper consumption and plans to dispose all the electronic waste through certified vendors. It aims for lowering greenhouse gas emissions by 30% over 2004 and achieving 20% of Leadership in Energy and Environmental Design (:LEED) certification within its corporate workplace portfolio.
The success of BofA’s initiatives seems imminent considering the mass awareness regarding the climate change across the globe. Consequently, the change in spending as well as investment pattern, responsive to efficient utilization of resources, will enhance businesses that are environment conscious.
However, it may be pointed out that BofA has made substantial investment in coal companies in recent times and it has drawn opposition from environmentalists. Environmentalists are of the opinion that until BofA reduces financing to fossil fuel industry, its plans related to environment will not work.
Conclusion
We expect BofA‘s initiatives to work in its favor as the awareness regarding climate change is spreading fast. Companies dealing in renewable energy resources and eco-friendly businesses may be very profitable in the coming years. This would help the banks, which are currently struggling to grow the top-line. In this way, the abovementioned initiatives will also be beneficial for the investors of these institutions.
Currently, BofA retains a Zacks #3 Rank, which translates into a short-term Hold rating. Considering the fundamentals, we also maintain a long-term Neutral recommendation on the stock.
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