Major banks, insurers team up with Carney, vowing to mobilize trillions of dollars toward net-zero goals

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Banks, insurers and fund managers that control US$70-trillion of assets have banded together to use their financial might in efforts to speed up the global transition to a net-zero emissions economy with the aim of preventing the worst effects of climate change.

Led by Mark Carney, former governor of the central banks of Canada and England, and now United Nations Special Envoy on Climate Action and Finance, the 160 companies involved have pledged to “mobilize” the trillions of dollars needed to make the changes that will help countries deliver commitments under the Paris Agreement.

The agreement would limit the global temperature rise to 1.5 C to 2 C by achieving net-zero emissions by 2050. Getting to net zero involves simultaneously reducing greenhouse gas emissions and offsetting those that can’t be cut. The financial institutions announced their group, called the Glasgow Financial Alliance for Net Zero, or GFANZ, ahead of the next UN climate summit in Glasgow, Scotland, in November.

Net zero is the holy grail of climate initiatives as scientists warn of worsening environmental and social impact. Under increasing pressure from investors and the public, financial institutions are increasingly pledging to slash their own CO2 emissions, but also those from lending and portfolio management. In conjunction with the formation of GFANZ, banks have formed their own group, Net-Zero Banking Alliance, under the auspices of the UN Environment Program Finance Initiative, to achieve those goals.

One problem on the path to net zero has been the difficulty in persuading companies in various industries to adhere to the standardized methods of both disclosure and getting emissions in check. Mr. Carney, who is also vice-chairman of Brookfield Asset Management, has been a leading force in the push to improve disclosure and shift financial structures to help decarbonize the global economy.

“This is the breakthrough in mainstreaming climate finance the world needs,” Mr. Carney said in a statement. “I welcome the leadership of the Financial Services Task Force and other global banks for their new commitments to net zero and for joining forces with GFANZ, the gold standard for net-zero commitments in the financial sector.”

He made the announcement in co-ordination with U.S. special climate envoy John Kerry and Treasury-Secretary Janet Yellen. Their participation shows the renewed focus in Washington on climate action under President Joe Biden, who is hosting a world leaders climate summit this week as a precursor to the Glasgow conference.

All of the signatories have committed to set science-based interim and long-term emission goals in line with the UN’s Race to Zero. That comprises a set of strict criteria, governed by an expert panel, that help ensure companies are making commitments, setting interim targets and taking actions “consistent with the science.” For banks, that means dealing with “Scope 3″ emissions – those generated by companies and projects that they finance.

The banks involved include such global names as Bank of America, Citigroup, BNP Paribas and Barclays – 42 in all with assets worth US$28.5-trillion. The only Canadian financial institution on the roster so far is Vancouver City Savings Credit Union, or Vancity, which has set a net-zero goal of 2040.

“Financial institutions have an enormous economic and social footprint. We must rally that influence to take on the crisis facing our planet and support the shift to a low-carbon economy that is clean and fair for everyone,” Christine Bergeron, Vancity’s chief executive officer, said in a statement.

Vancity does not finance oil or coal companies, and most of its lending book is composed of residential and commercial mortgages. But global financial institutions’ continued financing and equity capital-raising for the fossil fuel sectors remains a top complaint among environmental groups, which contend it is antithetical to any net-zero initiative. In an annual ranking by the Rainforest Action Network, called Banking on Climate Chaos, Bank of America and Citi were in the top five of banks financing fossil fuel development from 2016 to 2020.

“We can’t get to net zero if we continue to dump hundreds of billions of dollars into fossil fuel companies, particularly ones that are in the midst of expanding their operations – building more coal mines, digging for more oil or building more infrastructure that have lifespans of 20, 30, 40 years,” Richard Brooks, climate finance director for Stand.earth, said before the GFANZ announcement.

Most asset managers and owners that have joined GFANZ are already members of a group called the Net Zero Asset Managers Initiative, which includes such firms as BlackRock Inc., Brookfield, Fidelity and Vanguard Group, with US$37-trillion under management. BlackRock CEO Larry Fink made headlines in January by saying he was accelerating the fund manager’s push to get companies within its portfolios to make progress dealing with climate risks – or face possible proxy contests or divestment.

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