“This is where, right now, finance draws the line,” said Mark Carney, the UN's special envoy for climate action, in 2021, on stage at the UN Climate Change Conference in Glasgow.
More than 160 financial institutions have signed up to a sort of climate finance supergroup called the Glasgow Finance Alliance for Net Zero (GFANZ). At the time, Carney – who is now the expected contender for Liberal leadership – called the freshwater period for energy transfer.
But for some of these banks, it seems that time has passed.
Parts of the UN-backed initiative – originally designed to align banks and share investment practices towards net-zero goals – are seeing notable signs of leaving. One event, the Net-Zero Banking Alliance (NZBA), has had all major US banks quit in the past month. The latest, JPMorgan Chase, did not give a reason but said it “remains focused on pragmatic solutions to support low carbon technologies while improving energy security.”
Despite the NZBA subsidiary growing to more than 140 banks – holding trillions of dollars in assets that experts say will be needed to move away from environmentally damaging fossil fuels – the there are now fears that these proceedings will bring more pressure, including major Canadian financial institutions. .
Backlash against ESG
Although none of the departing banks gave a reason for leaving, climate finance experts identified the elephant in the room.
“All US banks are afraid of Trump 2.0,” says Paddy McCully, a California-based environmentalist and senior analyst at the French non-profit Reclaim Finance. ' attack Trump much more than their climate commitment, so they all boycotted the NZBA.”
In recent years there has been a backlash against ESG investing – which follows environmental, social and governance principles – by US president Donald Trump actively campaigning against it.
It has also been a lawsuit and probes led by Republican lawmakers against large investment firms such as BlackRock. They claim that these climate initiatives are anti-competitive, by putting pressure on the coal companies in portfolio companies to reduce their production to meet climate goals. That legal action was enough for BlackRock to do it announced his departure from another group of GFANZthe Net Zero Asset Managers Initiative.
Critics say this is not motivated by the public's desire to see their money invested away from these causes.
“It's not really a political movement of citizens,” says Adam Scott, executive director of Shift Action, a Canadian advocacy group focused on climate risks to pension funds.
“It's a cynical attempt by the fossil fuel industry, in concert with state governments, to try to slow down this inevitable trend that's happening.”
Will Canadian banks follow?
The same pressure, Scott says, doesn't exist for Canadian banks. And for now, Canada's major banks are still part of the alliance.
CBC News reached out to RBC, CIBC, Scotiabank, TD and BMO, which suspended a joint statement from the Canadian Bankers Association, the lobby group that represents them.
While he said the department “recognizes the important role it can play in facilitating an orderly transition to a lower carbon economy,” it was non-committal about federal involvement. in the future, saying that is something each bank decides independently.
But, Bloomberg reported from a business conference this week that some Canadian banks left the door open to a possible revolt, with RBC's CEO saying “there is no pulling out of NZBA, hypothetically, leads to a non-commitment to net zero or climate change. “
Cold truth
The purpose of voluntary initiatives like the NZBA is to coordinate and share best practices to harness the purchasing power of banks, with a focus on bringing the world's economy to zero emissions by 2050.
But in the years since they got involved in initiatives like this, some experts say that the complexity of the work has sunk in.
“Progress was made,” says Diane-Laure Arjaliès, of Western University's Ivey School of Business, “because there were new types of climate information … new carbon emissions that were not expected. So for those , right now, it's really hard to commit to zero.”
Critics also argue that many of these banks have made no progress in the years since 2021. Bank Report on Climate Chaospublished by a coalition of environmental groups, called JPMorgan Chase the “worst financier of fossil fuels,” with commitments for fossil fuel projects rising “from $17.1 billion in 2022 to $19.3 (billion) in in 2023” in US dollars.
“Maybe it's not a bad thing that a lot of these actors who were never really serious about net zero are leaving,” Scott said, adding that it leaves a smaller group of directors and more enthusiastic.
Net zero at last
Scott, McCully and Arjaliès all agree that European institutions, which are still members of the alliance, will carry on the net-zero torch.
“The political pressure in Europe is more on banks to go further and be more ambitious, than in North America, where it is more in the other direction,” said McCully.
There is also less pressure, because there are not as many domestic fossil fuel industries, and more environmental regulation to hold these institutions accountable.
But regardless of their membership in a voluntary group, experts say banks must face the financial impacts of climate change.
“It's a very reasonable economic decision,” Arjaliès told CBC News from London, Ont. “We have to move now. We are waiting every day we lose an opportunity and it will be more costly in the future.”
