Financial groups face expulsion from Mark Carney-led climate coalition

Financial institutions that have joined Mark Carney’s industry alliance to fight climate change could be kicked out for failing to meet their targets by a new independent panel, under plans set to be made public this year.

Enhanced UN checks on whether financial groups meet new criteria on ending coal finance and phasing out fossil fuels from portfolios could be announced during New York Climate Week in September and launched at the COP27 climate talks to be held in Egypt in November, according to Race to Zero, the UN group behind the plans.

Over 450 finance companies representing $130 billion in assets have joined the Glasgow Financial Alliance for Net Zero. The initiative, which was announced with great fanfare at last year’s COP summit, is led by former Bank of England governor and Brookfield Asset Management executive Carney, alongside former New York Mayor Michael Bloomberg and former Securities and Exchange Commission Chair Mary Schapiro.

Gfanz’s goal is to galvanize the world’s most powerful financial firms to commit to achieving a net zero global economy by 2050. Members are required to meet the standards set by the Race to Zero, a UN-led campaign.

While the Glasgow alliance was designed as a big tent to bring together as many new members as possible, the Race to Zero recently updated its rules to make them more onerous.

He introduced tougher criteria in June, including a ban on supporting new coal projects. Existing member companies will have to comply with the latest criteria from June next year.

Several people with knowledge of the campaign’s plans said it was setting up an independent accountability body where civil society groups, including nongovernmental organizations, could report financial institutions for failing to follow through. Race to Zero criteria.

According to plans, the body would have the power to evict financial institutions from Gfanz from early 2023. The plan is still dependent on securing the necessary funding, according to a person with direct knowledge of the situation.

“Race to Zero is setting up an inspector general’s office to oversee alliances and other individual commitments,” said a person closely involved with Gfanz. “Carney is all carrot and Race to Zero creates a stick.”

Financial institutions that have joined subsidiary groups under the Gfanz umbrella – which cover sectors such as banking, asset management, insurance and advisory – now face the embarrassing prospect of being scrapped if they do not meet the Race to Zero criteria.

The rules introduced in June require all signatories to “relentlessly phase out and phase out all fossil fuels” – projects that are not offset by carbon capture – by 2050 at the latest. It also requires them to stop funding new coal projects and meet interim net-zero emissions targets for 2030. The deadline to meet the rules is June 2023 for existing members, while all who join will be required to comply immediately.

Several people with knowledge of the situation told the Financial Times that some major US banks were particularly reluctant to set tougher targets.

“We have always implicitly said that members should be aligned with scientific goals, which means there is no new coal [financing]said Thomas Hale, professor of public policy at Oxford University and co-chair of the Race to Zero peer review panel. “Making it explicit will hopefully help those people in the back who are a bit hard of hearing.”

“We absolutely welcome the new Race to Zero compliance mechanism. . . to identify and remove members who do not meet its criteria,” Gfanz vice-president Schapiro told the FT.

“This mechanism, along with the clarified criteria that require members to disclose their transition plans, will help enable transparency and accountability around financial sector strategies and activities, and help clarify what funding is really in the pipeline. pursuing the net zero transition rather than obscuring companies as usual finance or greenwashing attempts.

Carney is due to be questioned by British politicians on October 24 as part of a parliamentary inquiry into the role financial firms are playing in climate change.

The UK Environmental Audit Committee will hold a series of hearings this autumn to investigate the effectiveness of the Gfanz initiative and the importance of the UK financial sector in achieving the Paris climate targets.

Carney should be asked about the repercussions for Gfanz members who stray from alliance goals. Alongside his work at Gfanz and other climate initiatives, this month he was named incoming chairman of Brookfield Asset Management, the $750 billion Canadian fund manager, where he is currently vice chairman and chief investment officer. of transition.

Nigel Topping, co-leader of Race to Zero and Gfanz, told the FT there was an urgent need for mandatory rules rather than voluntary initiatives to monitor the financial sector’s role in climate change. “It is foolish for the world to rely on underfunded NGOs to control capital markets,” he said. “Governments must step up their efforts.”

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