(Bloomberg) – Al Gore, the former U.S. vice president turned climate activist, says investors are growing increasingly impatient with evidence of potential “greenwashing” amid signs that pledges of net zero made by certain members of the financial sector were not credible.
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Gore, who spoke in an interview just before the start of Climate Week in New York last week, said commitments made by members of the No. 1 green club for bankers and investors – the Glasgow Financial Alliance for Net Zero – are “very welcome” and “not meaningless”.
“But obviously they have to be followed,” he said.
GFANZ, which has around 500 members representing over $135 trillion in assets, was hailed as a milestone at the COP26 climate summit last year. But now, “it’s become clear that some of those who made impressive promises didn’t immediately start putting a practical plan in place to deliver on those promises,” Gore said.
“Investors and others sniff out greenwashing more easily these days,” said Gore, who chairs Generation Investment Management. “And the pressure will mount.”
Against this backdrop of increasing surveillance, GFANZ has now seen its first official defections. Bundespensionskasse AG, an Austrian pension company, quietly withdrew last month, according to the GFANZ unit to which it reports. And the departure of the A$70 billion ($46 billion) Construction & Building Unions Superannuation Fund, known as Cbus, was made public earlier this month by the sub-alliance it belonged to.
“We have made the difficult decision to focus our resources on our internal climate change activities,” a spokesperson for Cbus, based in Melbourne, Australia, told Bloomberg. “We support the important work the alliance is doing and wish all members the best in their endeavours.”
GFANZ has sought to build credibility while remaining a voluntary alliance without binding rules that might scare off its members. But as he tries to introduce tougher standards, cracks become visible. For some members, there is a growing awareness that they may not meet the targets set by the alliance, while others have expressed concern that the organization’s stringent decarbonization requirements will put them at risk. make them legally vulnerable.
Last week it emerged that Wall Street heavyweights JPMorgan Chase & Co., Bank of America Corp. and Morgan Stanley were considering a possible exit from GFANZ. This was followed by a clarification of the GFANZ criteria, giving financial firms the flexibility to set lower fossil funding targets and ostensibly easing tensions behind the scenes.
For some, the development was a red flag.
Rebecca Self, a former senior banker at HSBC Holdings Plc who now runs Seawolf Sustainability Consulting, said GFANZ members seem to realize that “it takes more than initial commitment and rhetoric”.
“For net zero initiatives like GFANZ to work well, they require credibility beyond initial commitment and fanfare,” she said. “This includes transparency such as progress reporting and routine verification, including disclosure of fossil fuel funding.”
Mark Carney, former Governor of the Bank of England, co-chairs GFANZ with Michael R. Bloomberg, the founder of Bloomberg News’ parent company, Bloomberg LP.
In an interview with Francine Lacqua of Bloomberg Television, Carney downplayed the risk of defections and said Race to Zero, the UN-backed net-zero project that underpins GFANZ, had gone “too far”. ” with recent demands for more stringent decarbonization targets. Race to Zero has since updated its language and stressed that members must “independently find their own route” to the 1.5 degree Celsius aligned climate target.
Cbus did not discuss the legal risks associated with his departure from GFANZ. Instead, it listed the administrative burden of staying. Indeed, the development of regulations and standards requires signatories to adhere to parallel frameworks.
For some, these obstacles led them to snub GFANZ from the start. Blackstone Inc., Apollo Global Management Inc. and KKR & Co. Inc. are among the private equity giants who have found GFANZ membership an unnecessary burden. The insiders, speaking on condition of anonymity, cited the near impossibility of coming up with credible plans to eliminate their carbon footprint by 2050 as reason enough to avoid GFANZ and its sub-alliances.
Self says it is now “clear that the voluntary approach to climate action will not work”.
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