Wall Street Bankers Told They Can Set Their Own CO2 Terms Following Spat

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Last Updated on October 8, 2022 by Bitfinsider

A spokeswoman for the Glasgow Financial Alliance for Net Zero said in a statement that the organization has “had no indication from any of our members that they intend to depart.” This information was provided to Bloomberg News on Saturday by the spokesperson.

According to persons who are involved with the process, GFANZ, which brings together more than 500 financial organizations and manages more than $135 trillion in assets, has faced the possibility of defections from firms such as JPMorgan Chase & Co., Morgan Stanley, and Bank of America Corp. According to the sources, the heavyweights were unhappy about the possibility of the imposition of binding curbs on fossil fuel financing.

Tensions flared up after a group called Race to Zero, which is supported by the United Nations, made the proposal earlier this year that such phrases should be an essential condition for net-zero claims to be credible. This language was then watered down, and in its statement on Saturday, GFANZ claimed that each sub-alliance of the organization is “subject only to their own governance systems.” This effectively gives them the option to disregard such ideas.

The co-chair of GFANZ, Mark Carney, has already publicly reprimanded Race to Zero for going “too far” with their goals. According to Jakob Thomae, a member of the advisory board of GFANZ, he anticipates that certain components of GFANZ may eventually break their ties with Race to Zero and look for a more personalized decarbonization process to placate members.

However, there are already concerns being expressed in some quarters that the apparent marginalization of science marks a troubling development. These worries are being voiced in certain quarters. Al Gore, a former US vice president turned climate activist, issued a warning about a month ago that investors are growing increasingly impatient with evidence of potential “greenwashing” amid signs that net-zero pledges made by some members of the financial industry aren’t credible. Gore warned that investors are growing increasingly impatient with evidence of potential “greenwashing” amid signs that net-zero pledges made by some members of the

The spokesperson for GFANZ stated that although the alliance and its subgroups are linked with the Race to Zero, the seven sub-alliances are separate organizations with their own governance systems. These sub-alliances range from insurance to banking and asset management. As a consequence of this, these subgroups “are accountable for maintaining the accountability of their members,” and “any modifications to the nature of their obligations lay with the alliances.”

The statement released on Saturday just reflects what had been the existing governance structure, according to GFANZ, which added that several of its sub-alliances are convened by the United Nations. However, the necessity to reassure members of their independence has been bolstered in recent weeks by the escalation of tensions, as banks have reportedly been seeking urgent clarification behind the scenes. People who are aware with the process have shared this information.

According to climate nonprofit organizations, it is a risky move to give the sub-alliances the ability to determine their own rules. These sub-alliances have boards that are heavily represented by the banking industry.

One banker who was familiar with the issue argued that the release of such a statement ought to be regarded as a necessary concession to Wall Street in order to keep the banks on side.

The executive director of an environmental nonprofit in Paris named Lucie Pinson stated that attempts to relax the criteria of GFANZ membership have the potential to “kill” the net-zero alliance.

Prior to the release of the statement on Saturday, she made the following statement: “Even before the revelations that some banks may leave GFANZ in opposition to real climate action, there were plenty of doubts that the alliance could really deliver on net zero.” This was said before the statement was made public. “The resolution of this matter will provide us conclusive information as to whether we should expect banks to lead the battle against climate change or merely operate as agents of greenwashing.”

According to Thomae, who is also the managing director of the 2 Degrees Investing Initiative in Germany, for GFANZ to now maintain its ties with Race to Zero “isn’t viable” because the topic is “too serious to let non-sector experts set the rules.” Race to Zero is an initiative that aims to reduce greenhouse gas emissions to zero by 2050. Having said that, the optics of abandoning a climate program sponsored by the United Nations would probably be nasty whatever of the rationale, and there is a risk that its replacement may have less scientific credibility, he added.

Members of the financial industry have issued a warning that the only way they will be able to accomplish their net-zero goals is if the governments of the countries in which they are based establish suitable frameworks that eventually inspire their customers to make more effort.

Antoni Ballabriga, worldwide head of responsible business sustainability at the Spanish bank BBVA, stated that “the route to net-zero for banks is really tough.” “We will only be successful in accomplishing this goal if our customers and any other relevant stakeholders also contribute to the effort.”

The tensions around GFANZ are likely to set the tone for talks between the finance industry and Egyptian authorities the following month in Egypt, which is where world leaders are getting ready to meet for the COP27 climate meeting. A representative for GFANZ stated that the organization is “committed on delivering an extensive practitioner-led work plan for transition finance at COP27.”

The meeting in Sharm el Sheikh is taking place against the backdrop of the ongoing conflict in Ukraine as well as a worldwide energy crisis that has slowed down efforts to move away from the use of fossil fuels. While this is going on, there has been a steady increase in emissions, and experts believe that the Earth may now be on a path toward warming that is twice as fast as the essential limit of 1.5 degrees Celsius.

Earlier this year, Mark Carney, who had previously served as the Governor of the Bank of England, gave an interview in which he cautioned against adopting an attitude that is overly critical of the financial industry. He stated that obtaining commitments was the initial step to take. “Plumbing work” is the next step, and the purpose of this step is to “operationalize those pledges into net-zero plans and transition plans,” he stated.

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