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Exclusive-UN-backed bank group seeks to avoid departures with new climate guidelines
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Exclusive-UN-backed bank group seeks to avoid departures with new climate guidelines
Mar 5, 2024 1:27 AM

LONDON/NEW YORK (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 ), Citigroup ( C/PN ), HSBC ( HSBC ) and Westpac, 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 ) and Invesco ( IVZ ).

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)

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