Former US vice president Al Gore has accused financial institutions that have cooled on their climate ambitions of having a “lack of courage, fortitude and determination”.
The chair of green investment house Generation Investment Management signed off on the firm’s annual reflections yesterday, along with his business partner, the former chief executive officer of Goldman Sachs Asset Management, David Blood.
The pair lamented the recent rowback on net-zero ambitions by many large entities.
A number of leaders on corporate sustainability, including Unilever, Microsoft and Google, have recently admitted they won’t meet their climate goals.
During the summer, Swiss miner Glencore ditched plans to spin-off its coal assets, because, according to CEO Gary Nagle, investors had lost some of their enthusiasm for decarbonisation and ESG.
“Climate promises are starting to resemble New Year’s resolutions: easy to make, hard to keep,” suggested Gore and Blood, acknowledging that some of the backsliding has come in response to high-profile politician pressure in the US, which has become known as the ‘ESG backlash’.
“But the bigger problem has been a lack of courage, fortitude and determination at a global scale as some of the leaders who made big promises at the climate summit in Glasgow in 2021 realise how difficult those promises will be to keep.”
The pair said they were “especially disappointed by some of our colleagues in the financial services industry who took bold stances only a few years ago but are now wriggling out of their promises”.
At Glasgow’s COP26 conference, 450 financial institutions and service providers signed up to Glasgow Financial Alliance for Net Zero (GFANZ), committing to reach net zero by 2050.
Since then, a number of big names have withdrawn from subgroups within the initiative, including Munich Re, Vanguard, AXA and Allianz. Some of the rules were loosened to stop others from leaving.
Financial institutions to face ‘greenwashing reckoning’
The paper also predicted that the financial industry “is about to face a reckoning”, in part because it has “embraced fossil fuels for too long”.
“For decades, money managers and other investment professionals have got away with voluntary disclosures about their environmental records,” said Generation IM, which only invests in companies it deems to be ‘green’.
“That allowed many of them to paint themselves in a positive light – a practice known as greenwashing,” it added.
The various mandatory environmental disclosure rules that are being introduced around the world will force a more honest conversation about entities’ environmental credentials, the report pointed out, and introduce penalties for those that fall short.
“The era is dawning when lying about a corporation’s environmental record can get its executives thrown in jail,” it stated.
Economic and geopolitical worries
Gore and Blood also described some of the emissions reductions in rich countries as “an illusion”, arguing that they have simply outsourced their industrial output to poorer countries such as China and Vietnam.
Meanwhile, they warned that the increasingly tense geopolitical situation between China and the West could derail the push for net zero.
“We very much fear that elements of the energy transition could get caught in the crossfire,” the paper stated, pointing to increased tariffs on green products imported from China to places across North America and Europe.
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