Yes, U.S. Banks, It’s Past Time to End Support for Extreme Climate Goals and ESG

The Financial Post is reporting that major U.S. banks are threatening to withdraw from a green banking and investment group committed to obtaining net zero goals due to fears of lawsuits and the impact of increasingly stringent emission reduction goals on the firms’ profitability. This is a wise decision. Ending the use of fossil fuels in a vain attempt to prevent climate change is bad for the economy, in general, and banking and diversified investment funds, in particular, thus these banks never should have led or participated in such an effort.

The Financial Post story, titled “‘Immoral and irresponsible’: U.S. banks threaten to leave Mark Carney’s green alliance over legal risks,” reports major U.S. financial institutions are having misgivings about the ever more stringent climate goals pushed by the Glasgow Financial Alliance for Net Zero (GFANZ), an organization consisting of 450 finance companies accounting for US$130 trillion of assets that works with the United Nations to meet net zero carbon dioxide emission goals. The Financial Post writes:

Wall Street banks including JPMorgan Chase & Co., Morgan Stanley and Bank of America Corp. have threatened to leave Mark Carney’s financial alliance to tackle climate change because they fear being sued over increasingly stringent decarbonization commitments.

In tense meetings in recent months, some of the most significant members of the Glasgow Financial Alliance for Net Zero (GFANZ) have said they feel blindsided by tougher UN climate criteria and are worried about the legal risks of participation, according to several people involved in internal discussions.

“I am close to taking us out of these global green commitments — I’m not going to allow third parties to create legal liabilities for us and our shareholders. It is immoral and irresponsible,” one senior executive at a United States bank said. “What if we get it wrong, make a mistake or someone lies? Then the bank can be sued, that is an unacceptable risk.”

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 Carney’s alliance.

Bankers … also point out the lack of GFANZ members from China, Russia and India — three of the world’s top carbon-emitting countries.

Nor, the Financial Post reports, is it just major U.S. banks that are concerned about increasing carbon dioxide commitments and potential regulations to enforce them.

“European banks including Santander Bank NA have also expressed misgivings,” says the Financial Post. “Banks’ legal departments are particularly anxious about tougher U.S. Securities and Exchange Commission rules around climate-risk disclosures and commitments proposed by SEC chair Gary Gensler in February.

“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 U.S. counterparts’ fears about lawsuits due to the SEC’s renewed focus on ESG and emissions reporting,” writes the Financial Post. “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.”

Banks are also receiving substantial pushback from U.S. states that are increasingly cutting financial ties to financial institutions that boycott companies in the fossil fuel industries or adopt ESG policies attempting to direct investment away from coal, oil, and gas companies for political reasons, as opposed to financial performance.

It is good that banks are waking up to the fact that the pursuit of net zero and ESG goals could put them at legal risk and negatively impact their financial performance. We at The Heartland Institute have reported on the economic harm net zero goals and ESG efforts could have on consumers, the general public, companies in particular industries, and the wider economy across a variety of platforms, here, here, here, and here, for example.

There is never a good time to adopt bad policies in the public or private sector, and net zero laws and regulations and ESG initiatives, whether pushed by woke government bureaucrats or financial elites running banks and investment houses, represent among the worst of bad policies—for the United States, the world, and companies and their investors.

H. Sterling Burnett
H. Sterling Burnett
H. Sterling Burnett, Ph.D., is the Director of the Arthur B. Robinson Center on Climate and Environmental Policy and the managing editor of Environment & Climate News. In addition to directing The Heartland Institute's Arthur B. Robinson Center on Climate and Environmental Policy, Burett puts Environment & Climate News together, is the editor of Heartland's Climate Change Weekly email, and the host of the Environment & Climate News Podcast.

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