Asset managers controlling USD$11 trillion have called on the world’s biggest banks to phase out the financing of fossil fuel companies and work towards achieving the goals of the Paris Agreement.
What is Happening?
- Asset managers, including Federated Hermes Inc.’s EOS division, Pacific Investment Management Co. and Fidelity International, have asked 27 banks to commit to eliminating emissions across their operations by 2050, including those generated from lending.
- The group of 35 investors also said that the banks should expand their green finance activities, withdraw any projects that are not compliant with the Paris Agreement and assess and disclose the greenhouse-gas emissions associated with their financing activities.
- The investors sent the letter to lenders including JPMorgan Chase & Co., HSBC Holdings Plc and UBS Group AG. Many of the banks have announced net-zero plans, but critics have questioned some of these, saying that many of them fail to mention fossil fuel financing and don’t include interim milestones.
- Other requests from the investors include banks setting conditions when providing financing tied to net-zero pledges- not relying too much on unproven emissions technologies and offsets, and for banks’ remuneration committees to ensure variable compensation is aligned with the delivery of net-zero and interim climate targets.
- Banks have an important role to play in efforts to limit global warming as the gatekeepers of capital for much of the world economy. The industry is now being called on by a growing number of activists, policy makers and investors to use its influence and resources to facilitate the transition to a net-zero world.
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Natasha Landell-Mills, head of stewardship at Sarasin & Partners, says, “The problem we face today is that too many banks fail to consider climate harm when they make financing decisions, and too much money is being plowed into carbon-intensive activities that we so desperately need to move away from.”
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