UN-backed bank group seeks to avoid departures with new climate guidelines

Amalgamated Financial

05/03/2024 09:00

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      New framework a compromise to keep NZBA intact
    

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      Guidelines offer more details on tracking emissions
    

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      Requirements focus on disclosures rather than collective
action
    

  
    By Simon Jessop, Isla Binnie and Tommy Wilkes
       LONDON/NEW YORK, March 5 (Reuters) - A United
Nations-backed alliance of banks is proposing its members
disclose more information on their commitments to tackle climate
change without requiring them to coordinate action, in a
compromise it hopes will prevent departures, according to people
familiar with the matter.
    The Net-Zero Banking Alliance (NZBA), whose 143 members
oversee $74 trillion in capital, is trying to remain intact as
attacks by some U.S. politicians and investors against
environmental, social and corporate governance (ESG) policies
test the resolve of banks to stay as members.
    Three years after its launch, NZBA has proposed its first
major update to guidelines on setting targets for cutting
greenhouse gas emissions linked to members' activities, on the
way to bringing them down to zero on a net basis by 2050.
    The new guidelines, drafted by the NZBA's steering group
that includes banks such as Bank of America  BAC.N , Citigroup
 C.N , HSBC  HSBA.L  and Westpac  WBC.AX , cover how banks track
emissions linked to activities such as dealmaking and bond
issuance, and how they engage with corporate clients on their
energy transition plans, the sources said. 
    The guidelines, to be voted on by NZBA members in the coming
weeks, also contain new language stressing that banks act
independently, part of efforts to head off potential antitrust
lawsuits threatened by some Republican officials and their
allies in the United States. 
    The overall effect of the updated guidelines would be to
increase disclosures from banks on climate change without
compelling them to specific action, the sources added.
    A spokesperson for the United Nations Environment Programme
Finance Initiative, which administers the NZBA's secretariat,
declined to comment.
    The details of the new guidelines, which have not been
previously reported, shed light on how the NZBA is trying to
avoid the fate of other coalitions under the Glasgow Financial
Alliance for Net Zero, a U.N.-backed umbrella group. 
    Two other GFANZ groups, the Net Zero Asset Managers
initiative and the Net Zero Insurance Alliance, have seen more
than 20 members exit since late 2022 amid concern that ESG
critics would target them with collusion lawsuits. 
    A separate investor group, ClimateAction 100+, which seeks
to pressure big polluters to decarbonise, has seen five major
U.S. asset managers quit or scale back their involvement in
recent weeks, including JPMorgan Asset Management, BlackRock
 BLK.N  and Invesco  IVZ.N .
    U.S. banks had previously expressed concern about avoiding
close coordination and setting rules that were too prescriptive,
leading GFANZ in 2022 to drop a requirement for members to sign
up to the U.N.'s Race to Zero campaign. 
    That campaign aimed to secure bigger commitments to cut
greenhouse gas emissions, with members agreeing to phase out
development, financing and facilitation of new unabated fossil
fuel assets, including coal.
    Some European lenders, including Netherlands-based Triodos
Bank, warned last year that they could reassess their membership
of the NZBA if the new guidelines were not tough enough. The
bank did not immediately reply to a request for comment on the
latest guidelines.
    The new guidelines also cover how banks deal with regulators
and lobby groups, the sources said, and make a more explicit
reference to the target of capping global warming at 1.5 degrees
Celsius above the pre-industrial average by 2050.
    That commitment came despite some banks wanting to adopt
less ambitious "well below 2 degrees" language that underpinned
their targets, and as a result a number of banks may need to
adjust their existing targets, one of the sources said.
    Two European bankers told Reuters they wanted more ambitious
and tougher demands of lenders in the updated guidelines, but
that U.S. banks' antitrust concerns had made everyone reluctant
to push too hard. 
        Sources from both U.S. and European banks said that
while the same alliance struck three years ago would be unlikely
to come together now, they did not want to abandon it. One
European banker said it "mustn't fall apart".

 (Additional reporting by Lananh Nguyen, Tom Westbrook,
Yantoultra Ngui, Makiko Yamazaki, Danial Azhar, Byron Kaye,
Praveen Menon, Josh Smith, Hadeel Al Sayegh, Jesus Aguado, Tom
Sims, editing by Deepa Babington)
 ((simon.jessop@thomsonreuters.com; +44 (0) 207 542 5052;
Reuters Messaging: Reuters Messaging:
simon.jessop.thomsonreuters.com@reuters.net))