The coordination group of global financial institutions co-founded by former Bank of England Governor Mark Carney is in urgent talks to review the terms of surveillance by a United Nations body on climate change, according to people familiar with the band.
The squabbles indicate the scale of the challenge facing world leaders next week at the IMF and World Bank annual meetings and the upcoming COP27 UN climate summit, as they seek to frame the climate action in the face of acute energy security concerns.
Banks in the United States, including JPMorgan, have suggested they could pull out of the so-called Glasgow Financial Alliance for Net Zero (Gfanz), fearing they risk breaching antitrust laws in the United States if they advised on investment decisions from the UN Campaign.
The United Nations body called Race to Zero sets criteria to ensure that business groups come up with credible climate change goals and plans in exchange for its endorsement.
Gfanz has previously said meeting UN standards is a necessary condition for sub-groups representing the banking, asset management, insurance and pensions sectors to join and remain members of the alliance. .
On Saturday, he said he had “received no indication” from its members that they were preparing to leave the group, but noted that the financial institutions were independent and “managed and subject only to their own governance structures. governance”.
“Any updates on the nature of their commitments are the responsibility of the alliances, as indicated by their respective governance processes,” he said.
This effectively frees some of the world’s largest financial institutions from binding UN-imposed restrictions on their investments and the financing of fossil fuel-related assets.
In the United States, Republican politicians and officials have honored Gfanz and its members, including BlackRockwho sits on the alliance’s steering committee, for his criticisms that fiduciary duty could be undermined by concerns about environmentally friendly investments.
Gfanz’s review of its control structure linked to the UN body is an offer to ensure the continued support of all its members, according to those briefed on the discussions.
The Race to Zero campaign previously said it could kick out financial institutions if they fail to comply with a requirement issued in June to “restrict the development, funding and facilitation of new fossil fuel-related assets”.
This wording was then weakened last month, to submit an explicit ‘no new coal’ guidelines preventing members from funding or investing in new coal projects, after a backlash from some Gfanz parties as well as legal advice that its own staff may be breaching competition law by because of the binding language.
A broad faith-based financial climate movement crystallized under the aegis of Gfanz when it was founded in April last year. At the time of the UN’s COP26 climate conference in Glasgow in November, it had around $130 billion in assets, designed to act as a forum for some of the biggest banks, asset managers, insurers and funds. of the world to coordinate efforts to reduce carbon emissions. emissions.
Co-led by Carney, now vice-chairman of the investment group Brookfield Asset Management, as well as businessman Michael Bloomberg, it has so far relied on the race to zero to set high-level rules. on how fast and hard to transition away from fossil fuels and what methodologies to use for climate risk disclosure. Individual industry groups within Gfanz, including the Net Zero Banking Alliance, develop policies within these parameters and are individual Race to Zero “partners” with their own distinct relationships to the group.
In addition to the cited legal concerns, the Gfanz membership changes are also a sign of entrenched differences between scientists, civil society groups and financial institutions over whether investors should divest polluting assets and whether to opt out. debt financing of new high-emission projects.
Since joining Gfanz, US banks have continued to provide finance to companies building new coal-fired power plants and infrastructure, including Japanese power giants Mitsubishi and Marubeni Corp, according to the NGO Reclaim Finance.
JPMorgan Chase has been the largest funder of fossil fuel projects since the 2015 Paris Agreement, data from the RAN climate campaign shows, stretching a total of $382 billion.
“Banks were happy to enter a big pageant contest at COP26 and get a whole lot of applause,” Justin Guay, director of climate finance strategy at campaign network Sunrise Project, told the FT. . “But when they realized the world expected them to keep what they said they would, they looked for practical excuses to shirk that responsibility.”
Race to Zero declined to comment.