Net-Zero Goal Of Financial Coalition Hindered By Defections

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Net-Zero Goal Of Financial Coalition Hindered By Defections

The parade of financial heavyweights leaving the Glasgow Financial Alliance for Net-Zero (GFANZ) grew this week when Zurich Insurance became the second company in five days to leave the international coalition of financial institutions dedicated to net-zero greenhouse gas emissions.

Many have been closed-mouthed about their reasons for leaving the group, but some have cited fear of antitrust lawsuits and frustration over inaction by other members.

Zurich pulled out of the Net-Zero Insurance Alliance (NZIA) – one of seven groups under the GFANZ umbrella – Wednesday. That followed German insurer Munich Re’s departure last Friday. 

The withdrawal of two major insurance companies is significant on its own but is made more so because it follows the recent exit of other prominent financial institutions.

Investment company Vanguard left the Net-Zero Asset Managers (NZAM) initiative in December. Subsequently, in February, Germany’s GLS Bank quit the Net-Zero Banking Alliance (NZBA). The NZAM and NZBA also operate under the GFANZ auspices. 

What Is GFANZ

Founded in 2021, GFANZ grew out of the 26th United Nations Climate Change Conference in Glasgow, Scotland.

The organization is a coalition of financial organizations working to achieve net-zero greenhouse gas emissions by 2050. As a result, it has faced opposition from some fossil fuel interests.

Antitrust Concerns

Both Munich Re and Zurich Insurance are founding members of the NZIA. 

Zurich said it had developed its own methodology for measuring and disclosing greenhouse gas emissions. Further, it said it would use that methodology to help customers reduce emissions.

However, Munich Re said it was pulling out of the group over fears of becoming embroiled in antitrust suits.

Republican Net-Zero Actions

Republicans have challenged the practice of considering the environment in making investment decisions. Some have raised the prospect of filing antitrust lawsuits to block such practices.

Florida Governor Ron DeSantos has banned environmental, social, and corporate governance (ESG) considerations in making state pension fund investments. Another 18 Republican governors followed suit. 

At the national level, President Joe Biden exercised his first veto of a bill that would have overturned a Labor Department rule allowing consideration of ESG in the decisions of fund managers.

Republican attorneys general in 25 states had filed a lawsuit in January to block the Labor Department’s policy.

Banking Frustrations

Discord among GFANZ members began last October in the banking sector – Net-Zero Banking Alliance (NZBA). At that time, some banks complained that targets for lowering emissions were too aggressive.

By February, GLS had enough of what it considered to be members’ reluctance to stop funding new oil and gas development. As a result, it left the NZBA.

Founded in 1974, GLS refers to itself as an ethical bank. In that regard, it targets cultural, social, and ecological projects.

With the exit of GLS, the remaining members of NZBA are taking heat from climate activists.

In February, ShareAction, which works with investors to make policies of financial institutions more sustainable, took action. It petitioned Barclays, BNP Paribas, Credit Agricole, Societe Generale, and Deutsche Bank to stop funding new oil and gas projects by the end of the year. 

Soon thereafter, Barclays announced changes to its policy on funding tar sand oil production. As of July, Barclays says it will not fund new tar sand projects. However, it did say it will provide transitional funding to companies working to lower their emissions.

Vanguard Attacked

Banks are not the only institutions getting pushback amid the GFANZ shakeup.

Vanguard’s departure from NZAM has been lambasted by Vanguard S.O.S., an activist effort to hold the $8 trillion asset manager to NZAM standards. 

Vanguard S.O.S. launched a YouTube ad campaign that warned of the financial perils of investing without considering the environmental impact. It specifically targeted Vanguard.

A month later, the group launched a letter-writing drive linking the company’s fiduciary responsibilities to climate risk. As a result, Vanguard received 1,400 letters. 

Vanguard is one of the world’s biggest investors in oil and fossil fuels, according to Vanguard S.O.S. The activist group says the world will lose 10 percent of its economic value by 2050 if net-zero goals are not met.

Net-Zero Goal Of Financial Coalition Hindered By Defections
Brian Wallace

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