“Our customers, investors, employees and stakeholders – as well as voters and society as a whole – want our industry to respond to climate change,” the associations said in the draft report. “It is also increasingly clear that the industry must identify, measure and disclose the risks associated with climate change, both from our own operations and from exposures through our clients.”
Companies “have a clear mandate to transfer trillions of dollars to new industries, advanced technologies and resilient infrastructure, building on our long-standing commitments to sustainable finance,” the report said.
The broad collaboration between major industry groups – many of which have remained largely silent on the threat of global warming – reflects the dramatic turnaround in climate finance talks in Washington since Trump’s defeat and the astonishing Senate Democrats’ victories that brought them down. given control of Congress. .
Policymakers around the world are also increasingly concerned about the dangers that rising temperatures and natural disasters pose to the bottom lines of financial companies, as well as the possibility that they could incur destabilizing losses as governments move to a low carbon economy. While little was done in the United States during the Trump era, Democratic lawmakers and Biden regulators should impose drastic climate rules on financial institutions, including mandatory disclosure of their climate risks.
The discussions are sensitive for banks and insurers because their positions could ignite political tensions both on the left and on the right.
Conservationists argue that many of the measures the banks are backing fall short of what campaigners see as the best solution – ending fossil fuel financing. According to the Rainforest Action Network, 35 of the largest banks alone facilitated more than $ 735 billion in fossil fuel financing in 2019. The draft industry principles seen by POLITICO does not call for reducing these loans.
Moira Birss, co-coordinator of the Stop the Money Pipeline, which calls on lenders and insurers to stop supporting fossil fuel production, said any serious climate change proposal for banks must address financing the industries that cause the climate change. Measurement and disclosure, she said, are “totally insufficient answers.”
“While it’s nice that the US banking industry admits climate change is real, it always seems to want to pretend it doesn’t know what is causing climate change,” she said. “Since banks do not seem willing to stop making money from the very industries that are causing this crisis, regulators must use their powers to prevent another climate catastrophe.”
On the right, banks face a crackdown from climate change skeptics and Republicans who increasingly resist lender sustainability efforts that could affect the energy industry.
The Trump administration has attempted to impose rules on banks in its dying days, which would discourage them from withdrawing support for oil and gas projects. Last month, a group of 47 House Republicans wrote to the Federal Reserve to caution against climate-related stress testing for banks, fearing it could push lenders to sever ties with the banking industry. ‘energy. In November, the Fed for the first time formally highlighted climate change as a potential threat to the stability of the financial system.
In the draft report, the groups say future regulatory requirements, if necessary, should be “proportionate, risk-based, informed by consultations and based on sound data-driven analysis.” When it comes to regulations, they also signal unease with banks being used as government tools to tackle climate change.
“Care must be taken to distinguish the objective of financial stability from other broader economic and social objectives,” they said.
Industry sources said the idea behind the collaboration was to make sure financial firms have a place at the climate table in the Biden era and to show they want to support the transition. towards a more sustainable economy.
Banks have become more and more public in their environmental advocacy.
The Institute of International Finance, which represents global companies, has been among the most forward-thinking, its CEO Tim Adams – a treasury official in President George W. Bush’s administration – telling Biden’s economic adviser Jared Bernstein at a public event last year that the industry would be “a willing and active partner” on the climate.
Responding to questions about Wednesday’s report, the group said it had invited comments from its members and a wide range of stakeholders – from business, conservation and politics – on the principles “which could serve as a framework for industry to support a common sense transition to a more sustainable low carbon economy. “
“These draft principles reflect the initial discussions, but nonetheless indicate a general sense of the industry’s outlook on climate policy issues,”” spokesman Dylan Riddle said.
Other groups that participated in the discussions include the Institute of International Bankers, the Futures Industry Association, the Investment Company Institute, the Insurance Information Institute, and the International Swaps and Derivatives Association.
“G-20 leaders around the world are committed to building more sustainable, low-carbon economies,” said Scott O’Malia, a former Republican financial regulator who now heads the derivatives association. “The financial services sector has an important role to play in facilitating the raising of capital for climate innovation and providing risk management tools. “