European banks, including Santander, have also expressed misgivings.
The potential loss of some of the world’s biggest and most influential banks would be a serious blow for Mr Carney’s Gfanz group, which was formed last year and took centre stage at the COP26 climate talks in Glasgow in November.
More than 450 finance companies accounting for $US130 trillion ($195 trillion) of assets have joined Gfanz, which is co-led by the Canadian ex-Bank of England governor and current Brookfield Asset Management executive.
The banks’ biggest concern is over strict targets on phasing out coal, oil and gas introduced over the summer by the UN’s Race to Zero campaign, a UN-led net-zero standard-setting body that accredits pledges made by Mr Carney’s alliance.
The body will soon be able to take action against financial companies for failing to hit targets, which could lead to them being kicked out of Gfanz, the FT reported last month.
Banks’ legal departments are particularly anxious about tougher US Securities and Exchange Commission rules around climate-risk disclosures and commitments proposed by SEC chairman Gary Gensler in February.
The SEC will soon require formal disclosures in annual reports about governance, risk-management and strategy with respect to climate change. Companies will also have to disclose and be held accountable for any targets or commitments made, with detailed plans on how to achieve them.
A European bank executive said that “there is no way we are joining any new ESG groups, we don’t control them” and echoed their US counterpart’s fears about lawsuits due to the SEC’s renewed focus on ESG and emissions reporting.
Bankers say that the proposed SEC rules could add hundreds of pages to annual reports and require a small army of extra accountants and lawyers to produce and vet the data, which they contend is not yet reliable or properly codified.
Gfanz has faced pushback from lenders since its inception. Banks successfully resisted committing to the most explicit road map for cutting greenhouse gas emissions to net-zero by 2050, refusing to end financing of all new oil, gas and coal exploration projects immediately.
Bankers complain that the demands placed on them are not supported by equally robust government action on climate change, nor does the technology exist that hitting some of the net-zero targets will rely on.
They also point out the lack of Gfanz members from China, Russia and India – three of the world’s top carbon-emitting countries.
Of the 116 banks that have signed up to the Net Zero Banking Alliance (NZBA), the Gfanz banking subsidiary, none are from China or India, while Sovcombank is the only Russian lender. By comparison, Liechtenstein has three members.
Bank of America, JPMorgan, Morgan Stanley, Santander, Race to Zero and the UN Environment Programme Finance Initiative, which helps run the NZBA, declined to comment. The SEC and Gfanz did not respond to requests for comment.
US banks have also come under pressure from domestic politicians, notably in the Republican party, over their sustainability commitments. Red states such as Texas and West Virginia have been openly hostile to financial institutions that they feel do not offer enough support to the fossil fuel industry.
“There are a lot of banks looking at this and saying there will be a Republican Congress next year, so we’re going to have to be accountable for that,” said one person involved in the NZBA discussions. “It’s true that a global alliance without American banks, that’s a failure.“
Financial Times
