Major US banks, including Morgan Stanley, Bank of America and JP Morgan, are threatening to leave the Glasgow Financial Alliance for Net Zero (GFANZ), the financial climate alliance chaired by Mark Carney. They fear legal action if they comply with the coalition's commitments.
Decarbonizing the global economy
The Glasgow Financial Alliance for Net Zero, created last year at the 26th United Nations Climate Conference and chaired by former Bank of England governor Mark Carney, brings together 500 financial institutions representing over $130 billion in assets.
This coalition of insurance companies, banks and asset managers is pursuing the "net zero emissions" goal set by the UN, and is committed to decarbonizing the economy on a global scale.
Over the summer, the Climate Finance Alliance updated the criteria that financial institutions must meet to join the coalition. These requirements include no support for new coal-related projects, and the implementation of a transition plan by the end of the 1st half of 2023 to end fossil fuel financing.
Fear of prosecution
Some coalition members, including Wall Street banks Morgan Stanley, Bank of America and JP Morgan, say they have been caught off guard by the changing criteria, and fear legal action if they stop financing new coal projects.
These lawsuits could be initiated by US states such as Texas or West Virginia, which expect financial institutions to support the fossil fuel industry.
US banks are also concerned about the US Securities and Exchange Commission, which plans to tighten rules " on climate risk disclosures ", explains the Financial Times.
Indeed, the SEC " will soon require formal disclosures in its annual reports on governance, risk management and climate change strategy ", and companies will be held accountable for their commitments and targets.
US banks continue to finance coal
According to the Financial Times, the member banks of the Climate Finance Alliance have refused from the outset "to put an immediate stop to the financing of all new oil, gas and coal exploration projects ".
This observation is shared by the NGO Reclaim Finance, which reveals in a recent report that major US banks continue to invest " billions of dollars in companies developing new coal mines, power plants and infrastructure ".
Reclaim Finance points in particular to the " numerous transactions in support of coal developers " carried out after these banks joined the Net Zero Banking Alliance.
Since 2019, banks Goldman Sachs, Morgan Stanley, Citigroup, Bank of America and JP Morgan have thus, according to the report, " collectively provided $40 billion to coal project developers ".
According to Reclaim Finance, while US banks have indeed stopped " providing dedicated financing for new coal projects", the impact is virtually nil. And for good reason: " the bulk of their financing to the coal sector is provided through corporate financing, for which US banks have very flexible restriction criteria ".
.@BankofAmerica have provided US$31.1 billion to coal industry since 2019💣- Reclaim Finance (@ReclaimFinance) September 20, 2022
With US$709 million, it's one of the main banks providing financial resources to Adani.
Despite its net zero pledge, the bank has not adopted immediate exclusion criteria..https://t.co/a7sVFiuD4P pic.twitter.com/k48bgjJ48W
By continuing to lend to companies like Adani, Mitsubishi and Glencore, " some of the world's biggest coal developers ", US banks are indirectly continuing to finance fossil fuels, which Cynthia Rocamora, Private Finance Campaigner at Reclaim Finance, describes as " real climate hypocrisy ".
@MorganStanley can still finance at least 180 coal mining companies which are planning to expand their coal mining capacity by at least 2434 million tonnes/year.- Reclaim Finance (@ReclaimFinance) September 20, 2022
This is equivalent to over a third of the annual coal production worldwide💣https://t.co/a7sVFiuD4P pic.twitter.com/B06LHY8oT9