The leaders of major banks and other financial companies have rejected suggestions that they are not doing enough to combat climate change and resisted calls that they should refuse to work with clients that are major polluters.
The comments came at the World Economic Forum in Davos on Tuesday, after climate campaigner Greta Thunberg hit out at companies that she said were not doing enough.
Mike Corbat, chief executive of Citibank, said it was not the job of banks to ensure that companies were adopting environmentally friendly business models by unilaterally cutting off finance for polluting businesses.
“I don’t want to be the sharp end of the spear, meaning I don’t want to have to be the one telling [companies] or enforcing standards in an industry or business,” he said.
He added: “We don’t want to find ourselves being the person that dictates winners and losers. A bank’s job is to support the communities in which it operates. It is not to dictate outcomes.”
David Solomon, chief executive of Goldman Sachs, which recently worked on the initial public offering of oil company Saudi Aramco, said his bank would not “draw a line” by refusing to advise clients that are major polluters.
“If you’re looking for a line, there’s not a line. There’s a transition that’s going on, and my view is this is going to be a multi-decade transition where we see changes in the way people allocate capital,” Mr Solomon said during a panel discussion.
“Should we not raise money for a company that is a carbon company or a fossil fuel company? The answer is no, we’re not going to [stop doing] that.”
Brian Duperreault, chief executive officer of AIG, echoed Mr Solomon’s line: while he stressed that AIG is embracing sustainability (partly under pressure of its own employees), he also said that he is not ready to impose a blanket ban on offering insurance to coal companies yet.
Instead, he told a Davos panel that he is still willing to help “good” coal companies that are actively trying to transition to less damaging lines of business, since he wants to encourage a “transition” to better behavior.
But other asset managers, such as Hiromichi Mizuno, chief investment officer of Japan’s Government Pension Investment Fund took a different line. He told a Davos panel that it is imperative for asset managers to support green finance now, almost irrespective of consumer pressure or government rules.
Financial companies are facing rising pressure to show that they are taking action to prepare for climate change.
Axel Weber, chair of UBS, told investors at the start of the week that the Swiss bank — one of the world’s largest wealth managers — was racing to develop a suite of financial products that would allow investors to hedge their portfolios against climate change.
This would include innovations such as the creation of a long-short climate hedge fund product for the first time, and customisation tools which could be used to fine-tune portfolios to investors’ demands.
“You need the full complexity of products [for ESG] that you have in other existing financial markets,” he said. “I am very positive that there is not just the demand [for these products] but the supply and need too.”
Mr Weber added that climate issues were becoming so deeply embedded that he expected the carbon price to become as fundamental as Libor in shaping market products and pricing in future years.
Separately, Larry Fink of BlackRock said he had met a series of government and finance officials to explain last week’s announcement that BlackRock planned to embed climate risk analysis into the management of its investment portfolios for the first time.
“A lot of financial companies are wondering how to respond to what Larry did — there is pressure to find a response,” one senior American financier observed.
Brian Moynihan, chief executive of Bank of America, is leading a pan-industry initiative with leading accounting firms to create a unified accounting standard to enable companies to show how they are complying with the UN’s sustainable development goals, which include environmental issues.
But some corporate leaders are concerned that governments are not keeping pace with the scale of policy change needed.
There is also particular alarm that the recent tide of populism will undermine democratic governments’ ability to unveil effective measures to tackle climate change — and thus place further burden on the private sector to lead on this issue instead.
“We desperately need co-ordinated action from regulators,” one financial executive told a meeting organised by McKinsey to discuss climate change.
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