Major Canadian Banks Align with Wall Street's Departure from Climate Partnership
Several major Wall Street banks, including Goldman Sachs, Wells Fargo, Citi Bank, Bank of America, Morgan Stanley, and JPMorgan, along with Canada's six biggest banks, have recently withdrawn from the Net-Zero Banking Alliance and Net-Zero Asset Managers (NZAM) initiatives. The most notable departure is that of BlackRock, the world's largest investment management corporation, which left the NZAM last month.
The NZAM, a UN-sponsored initiative launched in December 2020 to support the asset management industry in committing to a goal of net-zero emissions, stated that it looks forward to continuing to play a constructive role with investors around the world. However, it was "disappointed" but respected BlackRock's decision to leave.
The exodus of banks from the Net-Zero Banking Alliance may signal to the market that climate change has become less of a priority for Wall Street. The departures occur largely because legal challenges, such as the antitrust lawsuit led by Texas and 10 other Republican-led states, create risks for these institutions, while many continue substantial fossil fuel financing despite their nominal net-zero commitments.
The lawsuits and political backlash represent obstacles that complicate firms' participation in such climate alliances, leading some to withdraw to avoid legal and regulatory risks. For instance, BlackRock's decision to leave the NZAM was prompted by pressure from public officials and Republican-led legal inquiries.
The NZAM initiative, which counts over 325 signatories managing more than $57.5 trillion of assets, announced a suspension of activities to "track signatory implementation and reporting" to undergo an internal review following BlackRock's departure. The Net-Zero Banking Alliance, set up in 2021 by former Bank of Canada Governor Mark Carney to encourage financial institutions to limit their environmental footprint and achieve net-zero emissions by 2050, has seen a significant number of withdrawals.
Despite leaving the alliances, the banks' decisions do not seem to impact their decarbonization pledges. For example, Royal Bank of Canada's CEO, Dave McKay, reassured that pulling out of the alliance "doesn't lead to a non-commitment to net zero or climate change."
The NZAM's website stated prior to Blackrock's departure that it aimed to mitigate financial risk and maximize the long-term value of assets. The exodus of banks highlights the complexities and challenges faced by financial institutions in fully committing to net-zero targets, particularly in politically and legally charged environments.
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- The NZAM, in a statement, confirmed that it will proceed to work constructively with international investors, despite the departure of BlackRock, due to the corporation's decision to leave last month.
- Environmental-science experts have expressed concern over the withdrawal of several major banks, including Goldman Sachs and BlackRock, from the Net-Zero Banking Alliance and NZAM, as climate change remains a critical issue in the global business sector.
- In a joint statement, the six Canadian banks that withdrew from the Net-Zero Banking Alliance stated that their commitment to sustainability and the environment remains unchanged, even as they exit these initiatives.
- The Finance Committee of the House of Representatives, in a hearing discussing climate change and finance, highlighted the risks and challenges faced by financial institutions in achieving net-zero targets, citing the recent departures from the Net-Zero Banking Alliance as examples.
- As science continues to underscore the urgent need for significant action on climate change, the decision of major financial institutions to withdraw from the Net-Zero Banking Alliance and similar initiatives raises questions about their long-term commitment to sustainability and the environment in the face of political and legal obstacles.
