The Reluctant Net Zero Delivery Drivers

How can we engage constructively across the competing paradigms within finance?

By James Vaccaro, Executive Director, Climate Safe Lending Network, May 2022

This month marked the midpoint between COP26 and COP27; a time to check in on the progress of climate action for GFANZ – the Glasgow Finance Alliance for Net Zero. The Net Zero Delivery summit held at Mansion House in London focused on net zero progress and the key priorities for finance. John Kerry was the highlight, invoking the scientific consensus that we are reaching tipping points, which if breached, would be irreversible. There were presentations covering all aspects of net zero: consultations on new standards, disclosure frameworks, committees and taskforces on transition plans and technical solutions. The message to the audience was one of plenty of work to develop components of an “intentional strategy” to meet the targets set on net zero.  

The clear buzzword of the event was ‘collaboration’ – hardly a panel went by without talk about the need to collaborate, to break down barriers and be inclusive. But the event’s own ‘delivery’, from the stage to the audience, neatly packaged into video content did not leave room for any questions and answers, or for open debate. 

And open debate and constructive engagement is what is needed if we want to achieve net zero, precisely because intentional strategy is never the whole story of what emerges in reality.  

Strategy and Culture 

Equally important are the attitudes and core beliefs which exist within the culture of institutions and systems, that can either embrace the intentional strategy with vigour, or undermine it with cynicism. Whereas an intentional strategy has clear lines, drawn up and agreed by everyone as a single point of truth, culture evolves out of the various norms and beliefs within organisations – and in climate finance there’s more than one of them. The alignment of organisational culture with intentional strategy is critically important for success – it’s why they say, ‘culture eats strategy for breakfast’.

The tidy narrative of net zero is that it’s a massively ambitious goal but we’re all on board, together. But there’s less discussion on how the ‘emerging strategy’ that’s evolving from the prevailing culture may be holding us back. There’s rarely airtime for what needs to change within institutions to phase out the values-to-actions gap. Culture is expressed more subtly, through the banter and raised eyebrows that determine the effectiveness of strategies.  

This is the real challenge we face in getting to net zero – we need to find ways to collaborate beyond the platitudes and headlines of intentional strategy and reflect on how we can support a deeper change in mindsets and motivation. 

It’s why the Climate Safe Lending Network focuses so much of our attention on these deeper systemic forces that live beneath the surface. Without broader transformation, we are likely to encounter further disappointment.   

The Climate Safe Lending Fellowship works with a cross-section of senior executives within banks who are climate intrapreneurs; they are in different roles, in different banks, connected by their values and desire to make positive change effectively through their institutions. They represent a new and emerging type of leadership.  And to be effective they will need to engage constructively with the other cultural forces within organisations that seek to hold back climate action.   

The Old Paradigm in Finance 

It’s abundantly clear that there are other forces within banking and lending institutions that are more reluctant drivers of change. There are norms and behaviours which reinforce old paradigms about how banking should be done and what the priorities are in the face of climate disaster. Some of those who feel reticent to shift to a different paradigm are the very ones directing the transition – making collaboration difficult and unlikely.  

It’s not often you hear the reluctant voices being open about their beliefs externally, which is what made the presentation last week by Stuart Kirk, Head of Responsible Investing at HSBC Global Asset Management, so illuminating. In case you missed it, he presented the case for why we shouldn’t worry about climate risk, why it didn’t matter if Miami was going to be 6 metres under water, and that if the average length of a loan to a coal mine is only 6 years, then there’s no need to worry because the world won’t look that different 7 years from now.  He dismissed those who bring up examples of loss and damage (like those describing the fate of vulnerable island nations) as ‘shrill hyperbole’ and appeals for finance to ‘get back to making money out of the transition’.  

The responses to his presentation from most of the commentators in ESG and sustainability focused on him personally, presenting (very convincing) evidence to show the flaws in his argument. But how does pointing to these facts land with people who identify with this worldview? Does it, in fact, make them more entrenched and reluctant to change?  

Will suppressing the expression of these views lead to resentment that will show up in ways more harmful to the implementation of strategies?   

As the psychologist Jonathan Haidt points out - facts are used to justify positions which we already choose to morally identify with. So, whilst there is an overwhelming amount of convincing evidence from scientists and experts that would set the record straight, the battle of ‘our facts are better than your facts’ rarely ends in the victory that is desired.   

So much has been written about Stuart Kirk in the past few days, it might be hard to see that really, this story isn’t about him. And it goes far beyond HSBC.  

It’s about a sector-wide culture that explains why 93% of survey respondents in the financial sector said they had experience negative attitudes towards climate action among decision makers in their institutions. To illustrate this, after the backlash Stuart Kirk has been suspended, but there were fewer questions about whether lending to new fossil fuels would be suspended.    

How do we want to drive change? 

As people who want to drive positive change in climate decisions in the financial sector, let’s avoid trying to ‘overcome’ a single individual with facts or use guilt and shame as the devices to force compliance. If we shun the individual, do we really address the underlying mental models they express? Or do we create a wider gap between what people say externally and the actions they take? 

Let’s ask how we can engage with empathy across the divide in world views, despite being annoyed or frustrated. The conversation has to go beyond facts and reach into a broader enquiry about purpose: what we care about and how we can invite others to connect with broader horizons, enabling people to connect with net zero strategies from multiple backgrounds and directions.   

Let’s acknowledge that the transition is difficult and unfamiliar for everyone.  

It is uncharted territory and deeply unsettling. It strips us of our expertise and makes novices out of professionals. It’s not unnatural for people to try to cling to what they know. Facing the reality that the continuation of our lifestyles is potentially threatening for civilisations half a world away is overwhelming. Is it really surprising that it triggers denial for many? And the data that the scientists relate in their papers and journals is not tangible for people when it is so far outside their realm of observation. Those scientists in Antarctica can describe the scenes at Thwaites Glacier (whose demise is likely to raise sea level of 65cm globally on its own), but very few people see Antarctica or can really relate to it.  

Some might say that being empathic would be ‘soft’. But can we really approach a lack of empathy to the fate of future generations with a lack of empathy towards those we disagree with?   

Learning to collaborate across differences is the unique differentiating factor of the human species.  The Net Zero Delivery summit acknowledged this, and the start of an intentional strategy is emerging. The challenge for changemakers is now: how should we engage those who express similar views internally, given it is very unlikely these views might be suppressed from the public arena and living in the shadows? 

It comes back to the buzzword of the day: collaboration.  Collaboration needs to be about recognising what everyone can bring that is useful, developing new patterns of behaviour and reflecting more openly on shared purpose. This is how we can prevent culture from eating our intentional net zero strategies for breakfast. 

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