Big banks resist most direct roadmap to net zero emissions

Banks have refused to commit to the most explicit roadmap to reduce greenhouse gas emissions to net zero by 2050, just weeks before the COP26 climate talks in Glasgow.

Negotiators on an initiative led by Mark Carney to encourage financial groups to stop funding fossil fuel companies have struggled to convince major banks to agree to end funding for all new exploration projects from oil, gas and coal this year, according to internal posts seen by Financial Times. This is aligned with the analysis of the International Energy Agency (IEA).

Many of the 59 banks joining the initiative of the former Governor of the Bank of England prefer to adopt targets derived from research on global warming scenarios by the International Panel on Climate Change (IPCC ), a scientific body of the UN, which is not prescriptive, and would leave the possibility of continuing the financing of oil and gas.

Carney’s initiative, the Glasgow Financial Alliance for Net Zero (Gfanz), was formed in April, attracting support from nearly 300 financial institutions with assets of $ 90 billion.

IEA published his analysis in May outlining a path to net zero emissions by 2050 to tackle climate change.

“No one is ready to put their name against IEA 1.5C [targets]Said a person familiar with the discussions with the banks. “They think it’s a fairy tale.”

More than 190 countries have pledged to limit global warming to well below 2 ° C and ideally to 1.5 ° C above pre-industrial levels as part of the Paris Agreement in 2015.

The Gfanz de Carney alliance has brought together a series of initiatives to encourage the world’s largest banks and financial institutions to commit to a goal of net zero emissions by 2050 to limit global warming.

Mark Carney, UN Special Envoy for Climate Action and Finance: “The next few weeks of this decisive decade will determine whether we avert climate catastrophe” © Neil Hall / EPA-EFE

Discussions at COP26 next month will focus on the rules for reaching the Paris Agreement, with finance’s role in climate change at the heart of the discussions.

Gfanz issued a call to action on Monday, calling on G20 governments for a series of key policies to achieve net zero. These include ending fossil fuel subsidies and seeing funds redistributed towards a ‘just’ transition, the relentless ban on coal and oil-fired power plants by 2040, as well as the introduction of mandatory climate reports for all companies by 2024 and reform of the global financial system. regulations to encourage green investments.

“Financial firms alone cannot produce sustainable economies – clear, credible and ambitious climate policies are needed from G20 governments,” said Carney, the current UN Special Envoy for Action and Policy. climate finance. “The next few weeks of this decisive decade will determine whether we avert a climate catastrophe. “

Gfanz’s banking group, known as the Net Zero Banking Alliance (NZBA), which includes HSBC, Bank of America and Santander, calls on lenders to set targets around climate change scenarios proposed by the UN IPCC or the Paris-based IEA, the organization of oil-producing countries.

Although the IPCC and IEA scenarios have broadly similar results in terms of global warming, the key issue for the banks is that the IEA presents a roadmap that specifically includes a ban on new exploration projects for fossil fuels from this year, while the IPCC does not.

There have been disagreements within the NZBA over whether to adopt the IPCC or IEA scenarios. The United Nations Environment Program Finance Initiative (Unep FI), which serves as the secretariat of the NZBA, supports the adoption of the IPCC report, in part because it is an organization sister in the UN.

“The IPCC scenarios are very rigorous, ambitious and science-based – they are the standard reference work around the world, widely used by policymakers, scientists and other experts, and underpin the process. of the COP ”, said Remco Fischer, Climate Change Manager at Unep FI. .

“There has been no disagreement within the NZBA on which script to use.”

However, email leaks showed that Gfanz advisers pushed banks to adopt the IEA roadmap, but they met resistance.

“The IPCC scenario allows banks to continue funding exploration plans,” said a person involved in the talks.

“It’s scientific fraud – the idea that you can keep increasing the production and use of fossil fuels, but tell the world you’re net zero.”

Banks are under increasing pressure from customers, investors and politicians to finance the coal, oil and gas industry. They have also been accused by activists and some shareholders of greenwashing for failing to live up to their public statements on the need to limit greenhouse gas emissions.

While lenders such as Standard Chartered, HSBC and Barclays have all recently publicly committed to achieving net zero targets by 2050, they have yet to stop funding fossil fuel companies.

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