Banks look to leave GFANZ - a decade of Climate Campaigner to Big Bank dialogue

By James Vaccaro, Executive Director of the Climate Safe Lending Network

It was recently reported by the Financial Times that major Wall Street banks are looking at leaving the Glasgow Financial Alliance for Net Zero (GFANZ) - a coalition of assets managers, banks and insurance firms representing $130 trillion in assets directed toward tackling climate change - over concerns about legal risks and the high standards they will be held to.

What on earth could be going on here?

As an advisory panel member of GFANZ, this is obviously a very concerning development. The story ‘bank leaves GFANZ’ is much easier to write than ‘bank makes substantial progress in reorienting its core strategy’. The litmus test for any voluntary initiative is whether it is successful in inspiring and motivating progressive action. Policing the minimum thresholds is the job of regulation. Whilst the unnamed bank executive who said in the FT article that banks couldn’t risk being sued or being subject to strictures from third parties might have forgotten that banks are subject to regulations that can impose fines. It’s now time for the regulatory bar to be raised so that together with a more progressive voluntary alliance there is pressure at all points on the system. And this should extend to the regional platforms being created in GFANZ too.  

But before going too far into what is happening now, one needs to consider the history leading to this moment, and in particular the history of the dialogue - real and imagined - between climate campaigners and the big banks.

A quick summary of the last decade of dialogue would sound something like this:

Climate Campaigners (CC): You’re doing lot’s of bad things with your money

Big Banks (BB): We care deeply about the planet and do lots of good things with our money, we’ve even joined all of these voluntary initiatives to make the world a better place and we’re spending a lot of time on disclosures.

CC: But you’re still funding way more harmful things than beneficial things.

BB: You don’t have evidence for that.

CC: Ah, but we do have data – lots of it! And it shows you have been financing all of the bad stuff like fossil fuels.

BB: Well, we can’t turn the taps off overnight.

CC: Errr… but you’re literally funding more taps and turning more of them on…

BB: Well we have to think about the social factors and the communities of workers in the fossil fuel industry who could be affected as part of a just transition.

CC: But there’s multiple communities affected – it’s not just the workers, it’s people who are suffering the consequences of the pollution in nearby communities and others feeling the impacts of climate change in the poorest parts of the world. Does your concern for social factors extend to them?  And it’s not like the workers are being helped in the transition, it looks more like it’s prolonging the status quo. 

BB: That’s really not an issue for us, that’s for governments. And the plain fact is that governments have not yet aligned their policies to accelerate the transition.

CC: But you influence the governments. And you’ve been actively lobbying against more climate-aligned financial regulation and you’ve supported advocacy that delays transition, which is protecting your own assets from transition risk.

BB: We have no comment at this time.

CC: Right, well we’re going to get you kicked out of all those alliances.

BB: We’re actually leaving anyway. And we said it first.

CC: Fine, go then!

BB: Fine, we will. Bye!

CC: Wait… where are you? We still have more data you know…

BB: …

CC: So much more data…

What would be a more productive conversation? We’ve had many incredible conversations between Banks, Activists, Think tanks and Academics, Investors, Regulators and other stakeholders in the Climate Safe Lending Network. It’s a place where people closely connected to the banking sector and its impact on the climate can meet one another in a safe, authentic space and have conversations that go far beyond the stereotypes. It’s never been more necessary for people within banks to have these conversations than right now. But so often the ‘messages’ are controlled institutionally.

Transition is ultimately inevitable. The major drag force slowing institutions down is that they believe that there is more to lose than to gain in going first. But many institutions are starting to conclude the opposite. The more of them that do, the closer we will be to the tipping point and the faster the whole sector will move.