Pension funds Cbus Super and Bundespensionskasse have become the first institutions to leave a financial alliance on tackling climate change spearheaded by former Bank of England governor Mark Carney.
Australia’s Cbus left the Net Zero Asset Owner Alliance in recent months citing resourcing problems, while Austria’s Bundespensionskasse left the Paris Aligned Asset Owners group this year, also due to a lack of internal resources, the PAAO said. The coalitions form part of the Glasgow Financial Alliance for Net Zero (Gfanz) that was launched with great fanfare last year.
Members of the seven subgroups under the Gfanz umbrella must comply with complex data tracking and reporting requirements that consume significant amounts of time and personnel, something that banks in the alliance have also raised as a concern.
Financial institutions are also facing a growing list of environmental disclosure requirements from regulators worldwide.
A$70bn fund Cbus, which joined the NZAOA in 2020, said it left the alliance in order to “focus our resources on our internal climate change activities,” adding that it had not altered its net zero emissions by 2050 target.
Bundespensionskasse, a €1.3bn fund, declined to comment on why it left the alliance, but said its “long-term goal is a climate-neutral investment approach”. The group has pledged to reach net zero emissions across all its assets under management by 2040. Gfanz declined to comment.
One of the Gfanz subgroups, the Net Zero Investment Consultants Initiative that launched with 12 members a year ago, did not disclose whether any companies had left.
The loss of members is likely to add to the growing pressure on Gfanz, which is designed to bring together as many financial institutions as possible and encourage action on climate.
Major US banks have threatened to leave the alliance over concerns that the commitments leave them open to legal challenges, the FT reported last week.
The objections have focused largely on worries that a co-ordinated restriction of support for the fossil fuel sector could fall foul of competition law. These antitrust worries prompted the UN Race to Zero initiative — which sets the standards for Gfanz membership — to issue revised guidance last Friday, dropping a stipulation that “no new coal projects” should be supported.
Critics, meanwhile, say Gfanz does not demand enough of its members, and that voluntary, private sector-led initiatives will not deliver the pace of change needed to avoid catastrophic warming.
Nigel Topping, co-leader of Gfanz, was among those to call for more robust climate-related regulation last week. “We cannot rely on voluntary action alone,” he said. Governments, regulators and the private sector must work together to “correct market failures and provide enabling regulatory environments to dramatically accelerate transformation to a 1.5C-aligned economy.”
In the US, financial institutions are facing a particularly challenging environment. A growing number of Republican lawmakers have hit out against products labelled as “sustainable”, and stepped up a campaign against environmental, social and governance investing.
At the same time, institutions are under scrutiny by US regulators and politicians. The chief executives of several major lenders were questioned last week by members of congress on topics including climate — a grilling that featured questions about the funding of the State Financial Officers Foundation, a group of US public officials that opposes action on climate change.
When asked by House Democrat Sean Casten whether they were still funding the group, JPMorgan Chase’s Jamie Dimon and Wells Fargo’s Charles Scharf both said they did not know.
Asked whether they would commit to ending any support for the SFOF, which Casten said was “spreading disinformation”, Dimon said “if that were true we would probably cancel it,” and Wells Fargo’s Charles Scharf said “I agree with Mr Dimon.”
Additional reporting by Simon Mundy