New UK-Based Climate Group Emerges as Banks Retreat

(Bloomberg) — It was a dank, drizzly February evening when about 120 people gathered in the brightly lit art gallery of London’s Guildhall, surrounded by gold-framed paintings ranging from Pre-Raphaelites to realists.

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At the event, Alok Sharma, a former member of the UK parliament who served as president-designate of the 26th United Nations Climate Change Conference in 2021, announced the launch of the Transition Finance Council. The goal of the London-based group, which includes banking executives, is to rally the City of London, companies and policymakers to scale funding for decarbonization efforts at home and abroad.

The intention is “to ensure that London is positioned as a preeminent financial hub for transition financing” and to “deliver at scale the finance to transition the global economy” to cleaner energy sources, Sharma said in his speech.

As Sharma pointed out, it was five years ago almost to the day that a similar event took place in the same building. The UK government, together with the Bank of England, had rallied six times as many people for the launch of what was called the private finance agenda for COP26.

That gathering was a more boisterous affair. The room was “packed to the rafters,” Sharma recalled. Mark Carney, then BOE governor, took the stage to interview legendary biologist and broadcaster David Attenborough. Christine Lagarde, president of the European Central Bank, dialed in.

It was “the point at which talk of sustainable finance and climate action moved from being a [corporate social responsibility] issue to being a C-suite issue,” Sharma said. A year later, Carney introduced the Glasgow Financial Alliance for Net Zero, an industry initiative uniting firms with more than $70 trillion of assets to accelerate the transition to net zero.

Much, of course, has changed since then.

Starting in December, all of the largest US and Canadian banks began fleeing the Net-Zero Banking Alliance, itself once part of the broader GFANZ framework. And last week, Australia’s Macquarie Group Ltd. said it too was retreating from the coalition.

The defections occurred as financial institutions seek to avoid right-wing attacks on sustainability and renewable energy, a US Republican-led war on behalf of the oil industry that’s only intensified with Donald Trump’s return to the White House. The insurance sector’s climate alliance also has been discontinued, while a similar group in the fund-management industry is on pause as it seeks to ensure that it remains “fit for purpose.”

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There’s “a lot of turmoil,” said Nina Seega, director of the Centre for Sustainable Finance at the Cambridge Institute for Sustainability Leadership. “Rhetoric is shifting and climate denial is becoming much more mainstream, so you then see a shift in the way different financial institutions are dealing with that.” Some are under more pressure than others, she said, but “none are immune.”

Last week, a few minutes before Sharma took the microphone to announce the Transition Finance Council’s formation, one chief sustainability officer (CSO) of a large UK-based investment manager was asking attendees who they thought would be the next company to retreat from net zero.

The query wasn’t surprising. CSOs face a more difficult landscape these days, what with big firms like JPMorgan Chase & Co. and BlackRock Inc. quitting climate-finance groups. On Wednesday, HSBC announced it’s pushed back its deadline to meet a number of key climate targets by two decades. As more companies back away, there are serious questions about the financial industry’s long-term commitment—and capacity—to help slow increasingly catastrophic global warming.

Forced to battle headwinds both inside and outside their firms, many CSOs are concerned they may no longer have the full support of their companies and leadership teams.

“Finance is being politicized, if not weaponized,” said Clemens Calice, a former Goldman Sachs Group Inc. banker who set up his own investment and advisory firm, Cygnum Capital. “Companies are under increasing pressure to align with a side or an agenda.”

For CSOs, all of this amounts to a “very challenging operating environment,” said James Alexander, chief executive of the UK Sustainable Investment and Finance Association. Politics and policy have “become much more fractured,” making judgment calls “much harder to make.”

At the same time, he said, “if you’re managing money, your responsibility is to consider risks, and sustainability is undeniably one of those risks.”

Britain stands out as a rare example of a country that’s advancing on climate action. Seven of the world’s 10 largest economies missed a recent deadline to file updated emissions-saving plans with the United Nations. The UK was the only one to outline a strategy for the next decade that’s anywhere close to consistent with the Paris Agreement target to keep warming below 1.5C.

“I’m very pleased to say” that the UK “has a government which recognizes that there is no trade-off between economic growth and the drive to decarbonize the economy,” Sharma said. The country is “uniquely positioned to lead.”

(GFANZ is co-chaired by Michael R. Bloomberg, the founder of Bloomberg News parent Bloomberg LP, and Mary Schapiro, the former head of the Securities and Exchange Commission.)

Sustainable finance in brief

North Carolina-based Duke Energy Corp., one of the biggest US power providers, removed a mention of climate targets in its latest earnings release as the company builds more natural gas plants and even reconsiders its plans for coal, the dirtiest of all fossil fuels. Duke said in its third-quarter earnings release last year that it was “executing an ambitious clean energy transition” and noted its goals to emit net-zero methane by 2030 and net-zero carbon by 2050. But the company’s fourth-quarter release on Thursday, while stating it was “executing an ambitious energy transition,” omitted the word “clean” and left out emissions goals. Though Duke says its strategy hasn’t changed, the move comes as Trump, who previously called climate change a “hoax” though has occasionally modulated that claim since, is nevertheless trying to increase production of fossil fuels while simultaneously seeking to zero-out net-zero policies. Duke said late last year it would consider shifting its plans for coal plants if the US president follows through on his promises to terminate rules governing power-plant pollution.

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