A global coalition of climate change bankers will ignore a proposal asking its membership to phase out fossil fuel financing.
In an open letter, published on 17 October, Tracey McDermott, chair of the 119-member Net-Zero Banking Alliance (NZBA), which includes some of the world’s top asset finance banks, wrote: “an autonomous governance structure and decision-making process” and any changes to its guidelines “can only take place in accordance with that governance.”
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McDermott, who is group head of conduct, financial crime and compliance at Standard Chartered bank, published the letter after an UN-backed Race to Zero (RtZ) campaign – that reviews and accredits net-zero initiatives – updated its criteria in June to put forward more stringent decarbonisation targets.
Race to Zero’s ratcheting up of its criteria irked several US banks who threatened to walk out over the issue, the FT and Bloomberg reported.
McDermott’s statement also prompted the Glasgow Financial Alliance for Net Zero (GFANZ), a broader finance coalition of which NZBA is a sub-group, to issue a response on how members can achieve their net zero commitments.
Fossil fuel financing
“NZBA is saying it is part of GFANZ and that doesn’t have anything to do with Race to Zero. But to be part of GFANZ you need be part of Race to Zero,” Ben Caldecott, director of the Oxford Sustainable Finance Group at the University of Oxford Smith School of Enterprise and the Environment, told Bloomberg.
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By GlobalData“Will GFANZ ditch this requirement and if it does, what are the new criteria to be part of GFANZ? And who marks that homework?” he said.
McDermott’s statement added: “it is important for members to understand that Race to Zero does not have the ability to impose requirements either on the NZBA as a whole or on individual members.”
Race to Zero caused alarm when it put forward an explicit requirement to phase down and out unabated fossil fuels, including coal.
In reaction to its proposals, RtZ revised its language and emphasised that members must “independently find their own route” to the 1.5C-aligned climate goal and do so by following the “most appropriate” science-based pathway.
The new guidelines are expected from June 2023.
“The NZBA will independently consider RtZ’s updated criteria, together with any other relevant changes in the external environment and any lessons we have learned over the first years of implementing net zero commitments and decide, through established NZBA governance, whether any changes should be made to our Guidelines to reflect these.
“The work we have ahead of us is challenging but more necessary than ever,” she said. “We remain firmly committed to the banking sector playing its part to achieve the 1.5C pathway,” McDermott added.
McDermott told Bloomberg the NZBA guidelines will be reviewed by 2024 at the latest.
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