Bankers told they can ignore binding fossil-finance restrictions

Bloomberg News | October 18, 2022 | 

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The world’s biggest climate coalition for bankers says it has the right to ignore a proposal that would require members to phase out the financing of fossil fuels.


Tracey McDermott, chair of the Net-Zero Banking Alliance, said in a letter on Monday that the 119-strong group, which counts Deutsche Bank AG, Goldman Sachs Group Inc. and UBS Group AG among signatories, has “an autonomous governance structure and decision making process” and any changes to its guidelines “can only take place in accordance with that governance.”

The clarification was issued after the United Nations-backed Race to Zero campaign, which reviews and accredits net-zero initiatives, updated its criteria in June to put forward more stringent decarbonization targets. That move angered a number of Wall Street firms, with JPMorgan Chase & Co., Morgan Stanley and Bank of America Corp. all threatening to walk out over the issue, people familiar with the matter said last month.

Efforts to reassure bankers that they can continue to finance oil, gas and even coal come less than a month before the COP27 climate summit in Egypt. The event looks set to draw far fewer financial chief executives than attended the COP26 summit in Scotland last year, Bloomberg News has reported.

Monday’s statement drew calls for the broader coalition — the Glasgow Financial Alliance for Net Zero — to clarify how members can achieve the net-zero emissions to which they’ve committed.

“NZBA is saying it is part of GFANZ and that doesn’t have anything to do with Race to Zero. But to be part of GFANZ you need be part of Race to Zero,” said Ben Caldecott, director of the Oxford Sustainable Finance Group at the University of Oxford Smith School of Enterprise and the Environment. “Will GFANZ ditch this requirement and if it does, what are the new criteria to be part of GFANZ? And who marks that homework?”

Changing the language

McDermott, who is also group head of conduct, financial crime and compliance at Standard Chartered Plc, underlined that it “is important for members to understand that Race to Zero does not have the ability to impose requirements either on the NZBA as a whole or on individual members,” according to Monday’s statement.

Race to Zero had put forward an explicit requirement to phase down and out unabated fossil fuels, including coal. The group has since revised its language and emphasized that members must “independently find their own route” to the 1.5C-aligned climate goal and do so by following the “most appropriate” science-based pathway. The new guidelines are due to come into effect from June 2023.

“The NZBA will independently consider RtZ’s updated criteria, together with any other relevant changes in the external environment and any lessons we have learned over the first years of implementing net zero commitments, and decide, through established NZBA governance, whether any changes should be made to our Guidelines to reflect these,” said McDermott.

“The work we have ahead of us is challenging but more necessary than ever,” she said. “We remain firmly committed to the banking sector playing its part to achieve the 1.5C pathway.” McDermott said the NZBA guidelines will be reviewed by 2024 at the latest.

(By Alastair Marsh)