Wall Street’s Biggest Names Are Backing Off Their Climate Commitments

Crazy world of climate finance [image credit: renewableenergyfocus.com]

Finance giants don’t like hefty fines for exaggerating their supposed climate virtues, or law suits for not acting in the best interests of their clients. Solution: leave their net-zero climate club.
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Vanguard, the world’s second-largest asset manager, announced that it is resigning from a global net-zero initiative.
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Shortly before COP26, last year’s United Nations climate conference in Glasgow, financial institutions were rushing to announce their climate commitments, says Grist (via Gizmodo).

The conference’s leadership and Mark Carney, a special envoy appointed by the United Nations to push private finance to invest in climate solutions, announced the creation of the Glasgow Financial Alliance for Net-Zero, or GFANZ.

The initiative’s goal was to increase the number of financial institutions committed to net-zero principles — essentially a promise that the work done by these institutions (investing, lending money, managing major assets like pension funds) would not cause an overall increase in the world’s carbon emissions.

During the conference, Carney announced that the coalition had grown to 450 firms responsible for $130 trillion in assets, a pot of wealth equivalent to more than five times the gross domestic product of the United States.

“You need things like GFANZ that are relentlessly, ruthlessly, absolutely focused on that transition to net-zero,” he told Bloomberg at the time.

But just a year later, many Wall Street firms are backtracking.
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The discussion is complicated by the fact that many fossil fuel investments managed by Vanguard and other asset management firms are held in index funds that track the performance of the overall stock market — the kind that many American workers use to save for retirement, for example.

These index funds invest in a broad range of companies regardless of those companies’ carbon emissions, and GFANZ didn’t change that — in part because changing the makeup of a fund would require the approval of investors and could result in legal challenges.

Full article here.