Major Wall Street banks have threatened to leave United Nations climate envoy Mark Carney's financial alliance over legal risks, the Financial Times reported on Wednesday, citing several people involved in internal talks.
Morgan Stanley MS.N, JPMorgan JPM.N, Bank of America BAC.N and Spanish bank Santander SAN.MC are among the banks that are considering an exit as they fear being sued over the alliance's stringent decarbonisation commitments, the report said.
The Glasgow Financial Alliance for Net Zero (GFANZ), set up in 2021 by former Bank of England governor Carney, is a coalition of asset managers, banks and insurance firms representing USD 130 trillion in assets directed toward tackling climate change.
Some members of the alliance have recently said that they “feel blindsided by tougher UN climate criteria and are worried about the legal risks of participation", the report said.
The banks' legal departments are particularly anxious about US Securities and Exchange Commission (SEC) rules around climate-risk disclosures, the report said. The SEC will soon require formal disclosures in annual reports about governance, risk-management and strategy with respect to climate change.
GFANZ has faced pushback from lenders since its inception. Banks successfully resisted committing to the most explicit road map for cutting greenhouse gas emissions to net zero by 2050, refusing to end financing of all new oil, gas and coal exploration projects immediately.
The bankers have also complained that the demands placed on them are not supported by enough government action on climate change and that there are fewer members in GFANZ from the world's top carbon-emitting countries such as China, Russia and India.
None of the 116 banks signed up to the Net Zero Banking Alliance (NZBA), which is one of the seven sector-specific alliances, are from China or India. It is a pertinent detail given that the two countries are in the top three carbon polluters worldwide.
One person involved in the Net Zero Banking Alliance discussions. “It’s true that a global alliance without American banks, that’s a failure.”