Bank of America Corporation
) 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.
Wells Fargo & Company
) committed $30 billion towards environmental investments followed
by a similar announcement by
The Goldman Sachs Group, Inc.
), which invested $40 billion. Earlier in 2007,
) 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
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.
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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