Business

Wall Street-Dominated Green Club Is Told It Has Rich-World Bias

Article content

(Bloomberg) — It was supposed to be a global alliance of financial firms to fight climate change. Instead, it risks becoming a rich-world club as banks from developing nations stay away.

The Glasgow Financial Alliance for Net Zero has been able to attract the titans of Wall Street and the City of London, including BlackRock Inc., Goldman Sachs Group Inc. and HSBC Holdings Plc. But the roughly 40% of global financial assets the group represents mostly excludes the biggest banks in China, India and Africa.  

Advertisement

Article content

“Climate commitments made by the Global North aren’t necessarily appropriate for Africa, especially sub-Saharan Africa,” said Wendy Dobson, Standard Bank’s head of group corporate citizenship. 

GFANZ requires members to commit to net-zero financed emissions by 2050. The mid-century goal is one that matches national targets across most of the rich world. But it’s a different picture in poorer countries. And in order to join GFANZ, developing-world banks would need to meet climate goals that mostly exceed those set by their governments.

“It is essential that an inclusive framework for a just transition to a low-emissions economy include recognition of the complexities of developing countries,” the Banking Association of South Africa, which represents the continent’s biggest financial sector, said in an emailed response to questions. “This is vital if South Africa is to avoid further unemployment and increased poverty.”

Advertisement

Article content

Rich World Legacy

The criticism gets to the heart of a fundamental debate over how to tackle climate change. Poorer countries say the rich world should carry a greater share of the burden after contributing far more to global warming — and accumulating considerable wealth in the process. The United Nations has acknowledged the merits of this argument. That’s why its national net-zero framework allows countries like India to take until 2070 to reach climate neutrality.

GFANZ wants to be a truly global alliance, and says it’s looking into possible changes to make that possible. The UN’s Environment Programme Finance Initiative, which convened the net-zero bankers’ alliance among other GFANZ subgroups, acknowledges it’s more challenging for banks to live up to a 2050 deadline if the governments of the countries in which they operate don’t.  

Advertisement

Article content

Remco Fischer, program officer at the UNEP FI, said the net-zero banking alliance “hasn’t taken a regionally tailored approach.” The group will consider making adjustments as it “continues to define its approach,” though “it may take some time before a significant number of banks in emerging markets and developing countries will be able to join,” he said.

While banks outside GFANZ often set their own climate targets, these tend not to face the same scrutiny and controls, or benefit from the support services that GFANZ offers members to help them work toward eliminating emissions. The upshot is that a smaller chunk of the global financial system is committed to a climate-neutral business model.

Financing Gap

Advertisement

Article content

Meanwhile, research provided by the United Nations shows there’s a widening gap between the cost of climate adaptation in developing countries and the level of public funding to pay for it.

Co-chaired by Mark Carney, the former Bank of England Governor, and Michael Bloomberg, the founder and majority owner of Bloomberg News parent Bloomberg LP, GFANZ counts about 450 financial firms that together represent assets worth $130 trillion. Firms that haven’t joined GFANZ include China’s three biggest banks. 

GFANZ has managed to attract banks from some corners of the developing world, like Latin America. For Africa, the economic resources needed to achieve net-zero greenhouse gas emissions are scarcer than in most other places, and bankers in the region say GFANZ should acknowledge that.

Advertisement

Article content

Nigeria, Africa’s biggest economy, targets net-zero emissions by 2060. Egypt, the continent’s second-biggest economy and the host of this year’s COP climate summit, hasn’t yet set a target. Of Africa’s major economies, only South Africa has set itself a 2050 net-zero target. And only three commercial banks in Africa — KCB Bank Group in Kenya, Investec Ltd. in South Africa and Commercial International Bank of Egypt — have signed up to GFANZ.

“It is critical that such coalitions properly address the energy poverty that confronts Africa, and recognize that in terms of the UN framework convention for climate change, and the Paris Agreement, Africa has a longer timeframe within which to transition to a lower-carbon economy,” Dobson at Standard Bank said.

©2022 Bloomberg L.P.

Bloomberg.com

Advertisement

Comments

Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. We have enabled email notifications—you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. Visit our Community Guidelines for more information and details on how to adjust your email settings.

Share this news on your Fb,Twitter and Whatsapp

File source

Related Articles

Leave a Reply

Your email address will not be published.

Back to top button