The apparent demise last week of the Net-Zero Banking Alliance (NZBA) is a setback in the fight against climate change. The NZBA has been coping with a wave of defections.
Mark Carney was a driving force in creating the alliance. Since its inception, more than 120 of the world’s biggest banks and other financial institutions in about 40 countries joined the alliance.
The non-profit NZBA’s goal is to help its members and their millions of clients transition to a green economy, and to encourage more lending to innovative clean-tech enterprises to develop their products and projects.
With his stature as former governor of the Bank of Canada and of the Bank of England, and in his role as UN Special Envoy on Climate Action and Finance, Carney was able in 2021 to rally global financiers to help accelerate decarbonization of the world economy.
At its peak, the NZBA was one of the largest networks of powerful financiers ever.
Billionaire former New York mayor Michael Bloomberg co-chaired the group.
Its “principals” who shaped guidelines for decarbonizing business enterprises and government agencies, included the CEOs of Bank of America, Citigroup, Deutsche Bank, HSBC, UBS, the London Stock Exchange and the Caisse de dépôt et placement du Québec.
Carney, who has declined media comment on the NZBA, drifted away from an active role in the NZBA as it got up and running, taking on more than a dozen directorships at international corporations and non-profit organizations and becoming an economic adviser to the Trudeau government.
Times have changed since the early 2020s when investors and governments were urging business to adopt clean-economy principles.
Business assets such as factories, data centres, power stations and office parks were seen to be at increasing risk from climate harms, including storms, flooded-out transportation arteries, droughts and fires.
They still are.
The recent wildfires in California alone caused an estimated $370 billion in damage.
But the mood has changed in the past four years. Historically high interest rates, trade wars, geopolitical conflicts and the allure of AI-related investments now command greater attention from investors than climate-change considerations.
And in the U.S. the regard for initiatives like the NZBA has turned hostile as the presidential administration of Donald Trump, who has called climate change a “hoax,” is dismantling government agencies and regulations geared to environmental protection.
Almost all the NZBA members do business in the U.S. and fear becoming targets of Trump’s wrath.
Several NZBA banks defected from the group after Trump’s re-election last November. They include JPMorgan Chase & Co., Citigroup Inc. and Morgan Stanley. Most of Canada’s biggest banks soon followed, dropping out of the alliance in January.
British megabanks HSBC and Barclays have quit the NZBA alliance, along with Swiss banking giant UBS.
The NZBA effectively became unsustainable with those departures, as Europe is seen as one of the world’s most advanced regions in fighting climate change.
Most of the NZBA defectors say they no longer need the group after developing their own decarbonization protocols.
“Having made significant progress alongside our clients in these areas, we are well-positioned to further this work outside of the formal structure of the NZBA,” Tom Wallis, a spokesman for CIBC, said after the bank withdrew from the alliance.
In retrospect, it seems fanciful that the NZBA could have succeeded in its mission, co-ordinating its initiatives among so many financial institutions, each with unique corporate cultures.
Accusations of “greenwashing” dogged NZBA from the start. Many of its members, including large Canadian banks, continued to finance oil, natural gas, and coal companies and projects.
The NZBA’s most recent revisions to its guidelines — which are voluntary — met with skepticism. The Amsterdam-based Global Alliance for Banking on Values (GABV), a business-backed consortium on decarbonation, said the latest upgrade of the guidelines was too weak to make a difference.
“By merely ‘encouraging’ disclosure of policies for the highest emitting sectors, rather than requiring it, the guidelines undermine the transparency and action necessary to ensure safer climate outcomes,” the GABV said.
Keith Stewart, a spokesman for Greenpeace Canada, is blunter, calling the defections from NZBA “a craven act of cowardice on climate change.”
In fairness to financiers, early-stage environmental technologies such as hydrogen, small-scale nuclear power, and carbon capture and storage are risky and unproven.
And there remains a comparative paucity of green investment opportunities. Wind-farm projects and solar-panel farms, for instance, are far fewer than easily traded securities in fossil fuel enterprises.
But a more aggressive NZBA could have established globally recognized standards for sustainable use of land, water and forests. It could have created a global clearinghouse for best practices.
The NZBA might have been ahead of its time. But the challenge it was meant to address has not gone away.
As harms from climate change worsen, it will become increasingly difficult to do business in a world where climate crisis has the upper hand.
