Unveiling the Potential Collapse of Financial Partnerships Aimed at Zero Carbon Emissions
The Glasgow Financial Alliance for Net Zero (GFANZ), established in April 2021, is a global initiative aimed at mitigating climate change threats in financial services. The alliance, led by Mark Carney, former Governor of the Bank of England and now Prime Minister of Canada, includes several major financial alliances such as the Net Zero Asset Managers Initiative (NZAM) and the Net Zero Banking Alliance (NZBA).
However, recent developments have raised questions about the feasibility and effectiveness of these alliances. According to various cost estimates, financing a net-zero energy transition is far too expensive, even if every able nation chipped in. The International Energy Agency estimates it would cost $4 trillion a year over the next 30 years to shift away from carbon emissions. Achieving global net zero would require nations to spend $9.2 trillion on physical assets annually, which is currently unreachable given the amount spent today.
The NZAM, which aims to erase carbon emissions from financial portfolios, has faced challenges. In January 2021, NZAM suspended all activities, including its webpage of global signatories. BlackRock, Vanguard, JP Morgan Asset Management, and Northern Trust, among the top 25 asset managers, have left NZAM. Paddy McCully, a senior analyst at the campaign group Reclaim Finance, stated that alliances like NZBA and NZAM may be in deeper trouble among US signatories.
The House Judiciary Committee recently accused NZAM of mandating "output reductions and price increases for American consumers" in its June 2024 report. This accusation, if proven, could further undermine the alliance's credibility.
Meanwhile, the NZBA, dedicated to mitigating perceived climate change threats in financial services, has seen significant departures. Six US banks, including Citigroup, JP Morgan, Goldman Sachs, Morgan Stanley, Wells Fargo, and HSBC Holdings, have left NZBA. Beyond the US, mega-banks in Japan and Russia have also left NZBA.
Despite these challenges, the remaining members of NZBA account for 40 percent of global financial assets. The leader of GFANZ, Michael Bloomberg, continues to advocate for the alliance's goals.
On the regulatory front, the Trump administration's efforts to repeal the EPA's 2009 Endangerment Finding are underway. Administrator Lee Zeldin is working to undo the Clean Air Act's regulatory constraints on carbon emission standards. The DOE's recent report on the effects of greenhouse gas emissions on the US climate provides scientific, peer-reviewed support for these actions.
However, the DOE's report also states that carbon emissions do not pose a cataclysmic effect on the earth's atmosphere as previously assumed. This finding could potentially slow down the push towards net-zero emissions.
In conclusion, the net-zero energy transition faces significant financial and political challenges. The future of alliances like GFANZ, NZAM, and NZBA remains uncertain, and the regulatory landscape continues to evolve.
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