The industrial livestock industry represents a small portion of big banks’ financing portfolios—but it may be responsible for a disproportionately large share of the greenhouse gas emissions of all companies with which the banks do business, according to a key finding in a report from the environmental nonprofit group Friends of the Earth United States and the research group Profundo.

The report, “Bull in the Climate Shop: Industrial Livestock Financing Sabotages Major U.S. Banks’ Climate Commitments,” was released Thursday, three years after the formation of the Net Zero Banking Alliance, a U.N.-convened group of global banks that committed to setting policies to limit the climate effects of their portfolios.

The commitments were meant to go beyond policies that just limited funding to fossil fuel companies. Within three years of joining, member banks committed to create plans for other carbon-intensive sectors, including agriculture. If they failed to do so, they must explain why. “We’re asking them to put their action where their words are and actually follow through,” said Monique Mikhail, Campaigns Director of Friends of the Earth’s Agriculture & Climate Finance program and a co-author of the report.

The report identified the 56 largest meat, dairy and animal feed production companies and the banks financing them. It found that three banks—Bank of America, Citigroup, and JPMorgan Chase—provided 60% of the financing to the companies. The banks are all members of the Net Zero Banking Alliance.

The report estimated that the companies accounted for just 0.25% of the three banks’ total outstanding loans but roughly 11% of the reported emissions from companies the banks finance.

Addressing industrial livestock emissions represents an efficient way for banks to combat the climate crisis, the report argued. “We’re saying to them, ‘Look, this is something that is a very, very tiny portion of your portfolio, but could actually make massive strides towards your own stated climate commitments,’” Mikhail said.

The U.N. estimated that animal agriculture accounts for 60% of food-related greenhouse gas emissions, and 14% to 20% of global greenhouse gas emissions. So far, Bank of America, Citigroup and JPMorgan Chase have not outlined specific targets for agriculture.

The banks declined to comment to Capital & Main.

In a climate report last week, Citigroup said, “Assessing the emissions and setting targets for the Agriculture sector are difficult due to the complexity of the agriculture value chain and the variety of greenhouse gas producing activities.”

The Friends of the Earth report proposed steps that banks could take to get a clearer picture of the activities that have the biggest effect. Banks could, for example, require clients to report “Scope 3” emissions—emissions from their entire supply chains—in order to provide a more realistic picture of their climate effect.

Currently, such data is lacking. According to the report, just 22% of the 56 corporations disclose Scope 3 emissions, while 56% do not report emissions at all. The U.S. Securities and Exchange Commission recently proposed and then dropped a Scope 3 reporting requirement for large companies; a similar requirement adopted by the California state Legislature in 2023 is currently being challenged in court.

The report also suggested that banks require their clients to create emissions-reduction plans aligned with goals of the Intergovernmental Panel on Climate Change and validated by third parties. They could also cease funding companies that plan to expand industrial livestock operations.

Mikhail said that bank funding allows factory farming to expand, even though global meat and dairy consumption will need to decline in order to meet global climate goals. “It is the lending from these banks that continues to allow this expansion to happen. So really, we want to eliminate this new financing for the industry,” Mikhail said.

The push to limit funding for new industrial livestock operations mirrors policies that many major banks have already adopted to limit funding for new coal plants and mines. While the policies have plenty of loopholes, they have likely helped make coal a more expensive and less attractive investment.

Other suggestions in the report mirror bank policies that require stricter oversight for funding sectors that could create reputational or legal risks to banks. For example, it recommended that banks require large animal agriculture clients—such as Brazilian beef producer JBS Foods; Nestle, the world’s largest dairy producer; and agriculture commodity companies such as Cargill, ABS Global, and Bunge Global SA—to meet standards around deforestation, respect for the rights of Indigenous people, and animal welfare. All five companies declined to comment.

Even though animal agriculture represented a small portion of the banks’ overall portfolios, any limits on agricultural lending, underwriting, or other financing is likely to draw scrutiny and pushback. In January, a dozen Republican state agricultural commissioners requested information on banks’ agricultural climate targets, citing concerns about affecting farmers.

Even so, animal agriculture is a major source of so-called biogas, the methane attributable to bovine flatulence and the manure from factory farms. A growing biogas industry frames such methane as a renewable alternative fuel that could replace a small percentage of fossil-based natural gas. But environmental groups contend biogas actually does more climate harm than good.

“Biogas systems are the most effective solution to cutting methane emissions from animal agriculture,” said Patrick Serfass, executive director of the American Biogas Council, speaking through a spokesperson. Such systems could reduce direct emissions and replace synthetic fertilizer, he added.

JPMorgan Chase includes biogas as an example of a green objective that counts toward its sustainable development targets.

Mikhail said that biogas production is only possible at the largest factory farms, the same ones that Friends of the Earth asks banks to stop funding. The kind of manure management required for biogas production also harms nearby communities, disproportionately affecting low-income communities and communities of color. “They are managing their manure in the most hazardous and methane-generating manner,” Mikhail said.

The connection to energy production may actually help boost industrial livestock production. Mikhail pointed to a “staggering” number of state and federal incentives and subsidies for manure biogas.

“These are perversely encouraging increased product of livestock operations — they’re also, perversely, encouraging the consolidation and the greater production of more methane,” she said. The American Biogas Council reported that 2023 was the third year of record growth for the industry.

In an email, a spokesperson for Serfass said that the council “opposes pressuring banks to limit lending to farmers and agricultural businesses” and that it supports policies that “support carbon reduction, improved water quality, soil health enhancements and reliable, renewable energy—all of which can be achieved through the continued expansion of the biogas industry.”

The Friends of the Earth report encouraged banks to require clients in the livestock industry to report separately on their carbon dioxide and methane emissions. It also urged banks to require clients to lower their overall methane emissions to 30% of 2020 levels by 2030, in alignment with global climate goals.

—Meg Duff, Capital & Main 

This piece was originally published by Capital & Main, which reports from California on economic, political, and social issues.

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