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ESG round-up: Carney keen to expand GFANZ membership to include Chinese banks

The latest developments in sustainable finance: City avoids deforestation resolution, Norges welcomes focus on enterprise value, half of UK business decision-makers prioritising growth strategies in pandemic recovery.

Mark Carney said that expecting banks to eliminate all financing of carbon-intensive industries is “unrealistic” in an interview with Bloomberg marking the one-year anniversary of the launch of the Glasgow Financial Alliance for Net Zero (GFANZ). The former Bank of England governor and current vice chair of Brookfield Asset Management argued that banks and asset managers have improved at moving away capital from fossil fuels despite “clickbait” headlines to the contrary – referring to a letter sent last week by NGOs calling out a “lack of meaningful progress” by GFANZ’s members.

He also said efforts to limit exposure to fossil fuels are being slowed by the war in Ukraine and its geopolitical repercussions. One of Carney’s next goals is for GFANZ to expand membership beyond its current $130 trillion alliance by looking to Asia and in particular Chinese banks, which are the world’s biggest contributors to coal finance. GFANZ is also developing a framework to help signatories cope with stranded assets, to track how much firms are doing to move to a low-carbon world, and to measure the level of global warming implied by investor portfolios.

Citigroup will not face a shareholder resolution on its deforestation policies after environmental investor Green Century announced it had withdrawn its proposal for the bank’s annual meeting, scheduled for Tuesday. In exchange, Green Century secured a commitment from Citigroup that the bank would adopt no-deforestation standards for soy clients operating in high-risk regions, develop a no-deforestation approach for high-risk beef clients, and improve its existing standards for palm oil and forestry clients to align with best practices. The announcement stated that in addition to being responsible for approximately 15 percent of global emissions, deforestation accelerates biodiversity loss, undermines healthy ecosystems and plays an active role in the spread of infectious diseases.

Norges Bank Investment Management (NBIM), manager of Norway’s trillion-dollar sovereign wealth fund, has welcomed the International Sustainability Standards Board’s (ISSB) focus on enterprise value. The sovereign wealth fund added: “[As] other institutions develop standards for broader sustainability reporting, they could refer to the IFRS Sustainability Standards as a core, and only seek to add further topic, region or viewpoint-specific requirements (‘building blocks’ approach).”

The Network for Greening the Financial System (NGFS), whose members consist of 114 central banks and supervisors, has opened a public consultation on its repository of climate data needs and available sources. The repository is used by financial sector stakeholders to identify important climate data sources but does not offer direct access to climate data. However, by linking climate data needs and some available sources, it allows stakeholders to identify data gaps in a systematic way. The NGFS aims to build further on its proposals by implementing practical solutions and policy recommendations to bridge the climate data gaps and maximise the availability of climate data for the financial sector. The consultation is open until 6 May.

Almost half of UK senior decision-makers are prioritising growth in their organisation, while one in five are prioritising the reduction of carbon emissions, according to the British Standard Institute’s (BSI) annual Net Zero Barometer Report. According to the report, many business leaders continue to find it hard to think about the net-zero transition in the context of the UK economy slowly recovering from the effects of the pandemic and businesses trying to address supply chain issues, inflationary pressures and labour shortages.

Only one-fifth of the 1,000 respondents confirmed that they were fully aware of what net-zero targets mean in practice for their organisation, despite the fact that 71 percent had already set targets to meet net zero. Forty-five percent of respondents cited cost as a barrier to reaching net zero, making it the leading challenge, above supply chain (29 percent) and regulation (25 percent).