Financial Industry, With $130 Trillion, to Pursue Climate Goals

The pledge would transform the international financial system, but critics say it falls short on fossil fuels.

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Global finance industry says it has $130 trillion to invest in efforts to tackle climate change.

Mark Carney, the former head of the Bank of England, is leading the the United Nations Glasgow Financial Alliance for Net Zero.Credit…Alberto Pezzali/Associated Press

Nov. 3, 2021, 6:14 a.m. ET

A coalition of the world’s biggest investors, banks and insurers that collectively control $130 trillion in assets said on Wednesday that they were committing to use that capital to hit net zero emissions targets in their investments by 2050, in a push that would make limiting climate change a central focus of most major financial decisions for decades to come.

The group, called the United Nations Glasgow Financial Alliance for Net Zero, is made up of 450 banks, insurers and asset managers in 45 countries. It said the pledge amounted to a transformation of the global financial system and would help businesses, financial firms and entire industries undergo fundamental restructuring for a carbon-neutral future.

“We now have the essential plumbing in place to move climate change from the fringes to the forefront of finance so that every financial decision takes climate change into account,” Mark Carney, the former head of the Bank of England, who is leading the alliance, said in a statement.

The agreements are largely voluntary. But they show a commitment by a broad range of financial institutions — banks, insurers, pension funds, asset managers, export credit agencies, stock exchanges, credit rating agencies, index providers and audit firms — to have emissions slashed in the companies in which they invest, and to have their lending aligned toward the target of restricting a global temperature rise to 1.5 degrees Celsius above preindustrial levels.

The companies agreed to undergo a review every five years to measure how well they are hitting these targets. They also said they would report the emissions they finance ever year.

But critics said the pledges fell short because they don’t commit investors to stop placing money in fossil fuels.

“This announcement yet again ignores the biggest elephant in the room: fossil fuel companies,” Richard Brooks, the climate finance director of STAND.earth, an environmental group, said in a statement. “We cannot keep under 1.5 degrees if financial institutions don’t stop funding coal, oil and gas companies.”

The coalition, which was created in April, is chaired by Mr. Carney, the United Nations’ climate finance envoy. Among its members are the investment management company BlackRock, HSBC Holdings, Morgan Stanley and Deutsche Bank.

Critically, the initiative would create a new body to hold investors and companies to account on climate-related goals.

The alliance also said that nearly 40 central banks in countries generating two-thirds of the world’s emissions would introduce stress tests to gauge how financial firms are handling climate-related risks. Some, including the European Central Bank and Bank of England, plan to administer the stress tests to the banks they supervise early next year.

The alliance also pledged to scale more private capital flows to emerging and developing economies, which are among those facing the most brutal costs of climate change.

Mr. Carney said on Tuesday at the Climate Horizon Summit in Glasgow that the finance industry was moving away from just seeing global warming as a risk to their business, and instead considering how the industry could be part of the solution.

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