“Our customers, investors, employees and stakeholders as well as voters and society as a whole want our industry to react to climate change,” said the associations in the preliminary version of the report. “It is also becoming increasingly clear that the industry needs to identify, measure and disclose the risks associated with climate change, both from our own business operations and from engagements with our customers.”
Companies “have a clear mandate to allocate trillions of dollars to new industries, cutting-edge technology and resilient infrastructure, building on our longstanding commitments to sustainable funding,” the report said.
The widespread collaboration among key industry groups – including many who have largely remained silent about the global warming threat – reflects the dramatic turn in the climate finance debate in Washington since Trump’s defeat and the impressive victories of the Senate Democrats who control them procured the Congress.
Policy makers around the world are increasingly concerned about the dangers that rising temperatures and natural disasters pose to the bottom line of financial companies, as well as the possibility they could suffer destabilizing losses if governments move to a low-carbon economy. While little was done in the US during the Trump era, Democratic lawmakers and Biden regulators are expected to impose comprehensive climate rules on financial institutions, including mandatory disclosure of their climate risks.
The discussions are sensitive for banks and insurers, as their positions can lead to political tensions both on the left and on the right.
Environmentalists argue that many of the steps banks are helping fall short of what activists see as the best solution – stopping fossil fuel financing altogether. According to the Rainforest Action Network, 35 of the largest banks alone allocated more than $ 735 billion to fund fossil fuels in 2019. The draft industry principles submitted by POLITICO do not provide for any restriction on this lending.
Moira Birss, co-coordinator of the Stop the Money Pipeline, which is urging lenders and insurers to stop promoting fossil fuel production, said any serious climate change proposal to banks must look at funding industries that are causing climate change. Measurement and disclosure are “totally inadequate answers”.
“While it’s nice that the US banking industry is admitting that climate change is real, it still seems like it wants to pretend it doesn’t know what is causing climate change,” she said. “As banks seem unwilling to make money from the industries causing this crisis, regulators must use their powers to prevent another climate catastrophe.”
On the right, banks are being pushed back by climate change skeptics and Republicans who are increasingly opposed to sustainability efforts by lenders that could impact the energy industry.
The Trump administration tried in its final days to impose rules on banks that would prevent them from withdrawing support for oil and gas projects. A group of 47 Republicans from the House of Representatives wrote to the Federal Reserve last month to warn of climate-related stress tests for banks, fearing it could spur lenders to sever ties with the energy industry. In November, the Fed officially highlighted climate change as a potential threat to the stability of the financial system for the first time.
In the draft report, the Groups say that future regulatory requirements should, if necessary, be “proportionate, risk-based, informed through consultation and based on sound data-driven analysis”. When it comes to regulations, they also signal a discomfort that banks are being used as government tools to fight climate change.
“Care should be taken to distinguish the goal of financial stability from other broader economic and social goals,” they said.
Industry insiders said the idea behind the collaboration is to ensure that financial firms have a place at the table in the Biden-era climate debate and show that they want to support the transition to a more sustainable economy.
Banks have become increasingly public in their environmental representation.
The Institute of International Finance, which represents global corporations, was one of the most forward-looking. Its CEO Tim Adams – a finance official in the administration of President George W. Bush – said Biden’s economic adviser Jared Bernstein at a public event last year that the industry is “a willing and active partner” for the climate.
When asked about Wednesday’s report, the group replied that it had obtained feedback from its members and a variety of stakeholders – business, conservation and politics – on principles “that could serve as a framework for the industry” to support a sensible transition a more sustainable low carbon economy. “
“These draft principles reflect the initial discussions, but show a general insight into the perspectives of the industry on climate policy issues.“” Spokesman Dylan Riddle said.
Other groups that participated in the discussions include the Institute of International Bankers, the Futures Industry Association, the Investment Company Institute, the Insurance Information Institute, and the International Swaps and Derivatives Association.
“G-20 leaders around the world are committed to building more sustainable, low-carbon economies,” said Scott O’Malia, a former Republican financial regulator who now heads the derivatives association. “The financial services industry plays an important role in facilitating the raising of capital for climate innovations and the provision of risk management tools.”