Ahead of Trump’s presidency, US banks are abandoning Mark Carney’s climate initiative

“It is here, now, where finance draws the line,” Mark Carney, the UN Special Envoy for Climate Action, declared in 2021, on stage at the UN Climate Change Conference in Glasgow.

More than 160 financial institutions have signed up to what looks like a major climate finance group known as the Glasgow Finance Alliance for Net Zero (GFANZ). At that time, Carney – He is now the expected challenger to the Liberal leader He described it as a watershed moment in the energy transformation.

But for some of these banks, the moment appears to have passed.

Parts of the UN-sponsored initiative — which was originally designed to bring banks into line with investment practices and engagement to achieve net zero goals — are seeing notable leakage. One offshoot, the Net-Zero Banking Alliance (NZBA), has seen all major US banks pull out over the past month. JPMorgan Chase did not provide a reason but said it “remains focused on practical solutions to help advance low-carbon technologies while enhancing energy security.”

Although the NZBA subunit has grown to more than 140 banks – holding trillions of dollars in assets that experts say will be needed to transition away from environmentally damaging fossil fuels – there are now fears such departures could lead to an even greater exodus, including from financial institutions. largest in Canada. .

Backlash against ESG

Although none of the departing banks gave a reason for leaving, climate finance experts pointed to the elephant in the room.

“All U.S. banks are afraid of Trump 2.0,” says Paddy McCauley, a California-based ecologist and senior analyst at French non-profit Reclaim Finance. “Their fear of being attacked by Trump is far greater than their commitment to climate, so they have all abandoned New Zealand.”

Recent years have seen a backlash against ESG investing – which follows environmental, social and governance principles – under US President-elect Donald Trump. Active campaign against it.

He was there too lawsuit and investigations led by Republican lawmakers against investment giants like BlackRock. They claim that these climate initiatives are anti-competitive, by pressuring coal companies in corporate portfolios to reduce their production in order to meet climate goals. This legal action was enough for BlackRock Announces her departure from another branch of GFANZNet Zero Asset Managers Initiative.

Critics say this was driven less by the public’s desire to see their money invested away from these causes.

“It’s not a real political movement of citizens,” says Adam Scott, executive director of Shift Action, a Canadian advocacy group focused on climate risks to pension funds.

“It is a cynical attempt by the fossil fuel industry, in collusion with state governments, to try to slow this inevitable transition that is taking place.”

Will Canadian banks follow suit?

Scott says the same pressure does not exist for Canadian banks. Currently, all major banks in Canada remain part of the alliance.

CBC News reached out to RBC, CIBC, Scotiabank, TD and BMO, who responded to a joint statement from the Canadian Bankers Association, the lobby group that represents them.

While he stated that the sector “understands the important role it can play in facilitating an orderly transition to a low-carbon economy”, he was not committed to future alliance participation, saying that was something each bank would decide independently.

but, Bloomberg reported From an industry conference this week that some Canadian banks left the door open to potential exits, with RBC’s CEO saying “withdrawing from the NZBA does not, in theory, result in a lack of commitment to net zero or climate change.”

Cold reality

The point of voluntary initiatives like NZBA’s is to coordinate and share best practices for harnessing all that purchasing power from banks, with a focus on getting the world economy to net-zero emissions by 2050.

But in the years since joining such initiatives, some experts say the complexity of the task has declined.

“Progress has been undone, because there are new forms of climate exposure… new carbon emissions that were not really anticipated,” says Diane-Laure Arjalier, of Western University’s Ivey Business School. “So, for them, right now, it’s very difficult to Commitment to net zero.”

Critics also argue that many of these banks have made no progress in the years since 2021. Latest Banking report on climate chaosissued by a coalition of environmental groups, called JPMorgan Chase “the worst financier of fossil fuels,” with commitments to fossil fuel projects increasing “from $17.1 billion in 2022 to $19.3 billion in 2023” in US dollars.

“It’s not necessarily a bad thing that a lot of these actors who were never serious about net zero are leaving,” Scott said, adding that it leaves a smaller, more committed group of leaders.

Net zero ultimate

Scott, McCauley and Argalis agree that the European institutions, which remain members of the alliance, will carry the zero-emissions torch forward.

“The political pressure in Europe is more on banks to go further and be more ambitious, rather than in North America, where things are going in the opposite direction,” McCauley said.

There is also less pressure, as there are not as many domestic fossil fuel industries, and more environmental regulation to keep these enterprises accountable.

But regardless of their membership in a voluntary group, experts say banks will need to address the financial impacts of climate change.

“It’s a very rational economic decision,” Argalis told CBC News from London, Ontario. “We really need to shift now. Every day we wait is a loss of opportunity and will be more costly in the future.”