In November, InvestNow, the not-for-profit of which I’m executive director, submitted shareholder proposals to Canada’s Big Five banks asking them to exit both the Net Zero Banking Alliance (NZBA) and the Glasgow Financial Alliance for Net Zero (GFANZ). These are two interrelated, UN-sponsored, and Mark Carney-led organizations whose members pledge to align their lending, investment and other activities with decarbonization goals, including achieving net-zero emissions by 2050. As I wrote in these pages in December, “Canadian banks should not pursue political or ideological goals at the expense of fiduciary ones. And they shouldn’t shun oil and gas.”
Well, fast forward to January and — presto! — we have (mostly) won, though not solely because of InvestNow’s efforts, of course. Six of the biggest U.S. banks have all announced they’re leaving the NZBA and four of the Big Five Canadian banks — BMO, CIBC, Scotiabank and TD — have followed suit. Also, in perhaps the biggest defection of all, BlackRock has left the Net Zero Asset Managers Initiative (NZAMI) — the asset management arm of the GFANZ. It is ironic that in the week Mark Carney announced his run for Liberal party leader, his most cherished project collapsed.
Why have these banks fled the net zero alliances en masse? In the U.S., at least, it likely has to do with the new administration having indicated an interest in investigating ESG (environmental, social and governance) lending and investing practices as potentially constituting a fraud against shareholders and the economy.
The U.S. banks have also been accused of collusion by the Republican-led House Judiciary Committee, on the grounds that their net zero policies, including divestment from oil, gas, and coal, have contributed to the big rise in energy prices since 2020. The committee found “substantial evidence that a climate cartel of financial institutions” had engaged in “anticompetitive collusion” by demanding that companies “disclose, reduce and enforce” their net zero climate commitments.
The first line of the committee’s report spells it all out. “In U.S. antitrust law, competition is always favoured over collusion. The largest money managers — however powerful they may be — cannot collude. This is especially true when their conspiracy shrinks the production of the affordable energy products relied upon by millions of Americans.”
The Judiciary Committee says membership in the NZBA and other “climate coalitions” is the gateway that enables banks to collude in pressuring American businesses to commit to “net zero” and scale down disfavoured production.
Both the American and Canadian banks have stressed that leaving NZBA won’t affect their net zero commitments or their determination to help achieve a “net zero global economy,” which means drastically reducing oil and gas production and consumption over a very short period. Could they all still be credibly accused of collusion, having committed to aligning their lending, underwriting and investing practices with decarbonization and net zero goals, even while officially leaving an international coalition that requires them to do so?
Canadian banks should take what is happening in the U.S. as a warning. Maintaining their singular focus on decarbonization to achieve net zero leaves them open to charges of collusion, too. The real-world effect of their favoured policy is to eliminate oil and gas, one of Canada’s most productive and prosperity-creating sectors. Its elimination would be bad for bank shareholders and customers, industry in general, the economy and our entire country. Their continuing down this ideological path, which runs contrary to the interest of shareholders and the public alike, should prompt further investigation.
InvestNow applauds the banks in both countries for exiting the net zero alliances as a first step towards moving past the madness of “Net Zero by 2050.” But the fact that they remain committed to decarbonization, to net zero, and to the effective end of our natural resource sector demonstrates that our work is not done.
Our banks need to ditch ideology and get back to serving the people of Canada and their interests.
Gina Pappano, executive director of InvestNow, was head of market intelligence at the Toronto Stock Exchange (TSX) and TSX Venture Exchange (TSXV.)
