US regional bank turmoil pushes Blue Ridge to quit UN-backed climate group

Blue Ridge Bankshares

05/02/2024 18:23

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      Cites need to focus on financial health 
    

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      Follows other defections from climate groups
    

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      Exit comes amid concerns about other U.S. regional lenders
    

  
    By Simon Jessop
       Feb 5 (Reuters) - Blue Ridge Bankshares  BRBS.A  has
become the first U.S. lender to quit the United Nations-backed
Net-Zero Banking Alliance (NZBA), citing a need to focus on its
financial health after it got swept up in the U.S. regional bank
crisis. 
    The Virginia community bank joined NZBA, a global coalition
of banks that have pledged to bring down carbon emissions from
their lending and investment portfolios to zero on a net basis
by 2050, in December 2021.
    Since then, Blue Ridge's shares have lost 85% of their value
following a spike in non-performing loans, its restating of
earnings reports, and a U.S. bank regulator cracking down on its
partnerships with financial technology startups because it found
it to be "in troubled condition".
    A Blue Ridge spokesperson told Reuters the bank decided
against renewing its NZBA membership following a strategic
review that focused on it overcoming its financial woes.
    "Based on our growth and need to focus on deposits and
community banking, we had to focus on our core business. We want
to be cognizant on carbon emissions, and we did not feel we had
the staffing resources to allocate to this," the spokesperson
said.
    While NZBA disclosed Blue Ridge's withdrawal last month, the
reasons behind the exit had not been previously reported. 
    Probes into banks' membership of NZBA and other climate
groups by Republican politicians opposed to limiting the
financing of fossil fuels, including Virginia Attorney General
Jason Miyares, did not factor into Blue Ridge's decision, the
spokesperson said, adding Blue Ridge may rejoin NBZA in the
future.
    The Glasgow Financial Alliance for Net Zero (GFANZ), the
organization under which NZBA sits and which is co-chaired by
Mark Carney, a former central banker, and Mike Bloomberg, the
founder of the eponymous financial information provider, did not
respond to a request for comment.
    Only nine of NZBA's 142 members hail from the United States,
with the vast majority based in Europe. The eight other U.S.
members are Amalgamated Bank  AMAL.O , Areti Bank, Bank of
America  BAC.N , Citi  C.N , JPMorgan Chase  JPM.N , Morgan
Stanley  MS.N , Goldman Sachs  GS.N  and Wells Fargo  WFC.N .
    Signatories to the NZBA agree to set emission-reduction
targets within 18 months of joining and publish their progress. 
    An NZBA report in December 2013 showed it had tripled the
number of members since launch in April 2021, and that over
two-thirds of members had set targets consistent with capping
global warming to 1.5° Celsius by mid-century.
    Last year, Germany's GLS Bank quit NBZA because some members
of the coalition continued to finance new fossil-fuel
infrastructure projects in Africa. Two other banks, Triodos from
the Netherlands and Britain's Ecology Building Society,
threatened to quit last year over what they argued were lax
emission reduction targets, but did not follow through.
    Other coalitions under GFANZ have had defections too. Most
have been at the Net-Zero Insurance Alliance, where last year
more than half its members quit citing fears they could be sued
for colluding. This prompted the group to ease its membership
rules.    
    Vanguard, the world's second biggest fund manager, left the
Net Zero Asset Managers initiative in December 2022 citing the
need to speak "independently" on issues of importance to its
investors.
    
    CONSENT ORDER
    Many U.S. regional banks are on edge after New York
Community Bancorp  NYCB.N  posted a surprise loss last week
because of its exposure to parts of the office property and
multifamily housing sectors, reviving investor fears about a
potential repeat of last year's crisis that led to the demise of
lenders such as Silicon Valley Bank and First Republic.  
    Last month, the Office of the Comptroller of the Currency, a
U.S. bank regulator, issued a so-called consent order
instructing Blue Ridge to improve its capital buffers and
restrict its partnership with financial technology startups,
citing lax financial controls.
    Blue Ridge has said it will reduce its number of financial
technology partners, to which it provides infrastructure so they
can offer banking to consumers, from 50 to a "limited number".
In December, it also raised $150 million by selling stock in a
private placement to improve its financial health. 
    Blue Ridge is the seventh-largest bank in Virginia by
deposit market share and has 27 bank branches. Its subsidiary
Monarch Mortgage has 16 offices, from Maryland to South
Carolina. 
    Blue Ridge posted a net loss of $51.8 million in 2023,
compared to net income of $17 million in 2022.

 (Reporting by Simon Jessop in London
Editing by Greg Roumeliotis and Christina Fincher)
 ((simon.jessop@thomsonreuters.com; +44 (0) 207 542 5052;
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