Four Major Banks Bail on Climate Targets, Cite Concerns About Financing Fossil Fuels

Four major banks withdraw from climate targets validation program

Four banks have left a climate targets validation scheme.

In a twist that resembles a dramatic breakup, four major banks, including Standard Chartered and HSBC, have decided to withdraw from a United Nations-backed initiative aimed at examining climate targets set by corporations, according to insiders. It seems that the banks have abandoned their efforts because they fear that participating in the Science Based Targets Initiative (SBTi) could throw a wrench in their ability to continue financing fossil fuels. It’s as if they’re saying, “Sorry, climate goals, but we just can’t commit right now.”

Joining Standard Chartered and HSBC in this retreat are Societe Generale and ABN Amro Bank. These banks are expressing concerns that the SBTi’s demands for greenhouse gas emissions target-setting are simply too difficult to meet. It’s like trying to fit a round peg in a square hole – it just doesn’t work. In an attempt to justify their departures, these banks have cited their membership in another United Nations-backed group, the Net-Zero Banking Alliance. This alliance, they claim, is less rigid and enables them to continue financing fossil fuels as long as they make progress on reducing emissions. After all, as many lenders argue, as long as economies rely on fossil fuels, they should be funded.

However, the departure of these four banks casts a shadow over the world’s most widely adopted standard for curbing greenhouse gas emissions. The Science Based Targets Initiative, in its role as a non-profit organization, has validated emissions targets of nearly 4,000 companies worldwide, all aligned with the Paris Agreement’s goal of limiting global warming to 1.5 degrees Celsius. To put it simply, SBTi has been the gold standard.

But things took a twist when SBTi revealed plans for a new standard specifically for financial institutions, set to roll out in 2024. This standard would require banks and asset managers to halt financing new fossil fuel projects. Well, this proved to be too big of a pill to swallow for Standard Chartered, which is keen on continuing its business in developing markets. They made it clear that SBTi’s proposed standard didn’t adequately consider the transition away from fossil fuels for their clients and markets. It’s like they were saying, “Hey, SBTi, don’t let us break your heart, but you’re just not meeting our needs.”

HSBC and Societe Generale are following a similar tune, stating that they’re setting their emissions targets in line with the guidance of the Net-Zero Banking Alliance. It seems like they found their perfect match, someone who understands their desires without being too demanding. Meanwhile, ABN Amro is also sticking with the Net-Zero Banking Alliance, keeping its options open and trying not to burn any bridges.

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But hold on, there’s hope for reconciliation. The Science Based Targets Initiative, upon receiving feedback, decided to tweak some of its requirements. Now, banks can continue to finance some fossil fuel projects that align with their near-term emission targets. However, they’ll still be expected to cease financing projects that would hinder their long-term emission targets. It’s as if SBTi is saying, “Hey, we understand it’s complicated, but let’s find a way to make it work.”

SBTi made a strong statement, asserting that we cannot successfully combat climate change and reduce our dependence on fossil fuels if we don’t make adjustments. Wise words indeed.

While most major European banks remain committed to SBTi, there’s a different story across the pond. Not a single major U.S. bank has joined the Science Based Targets Initiative, choosing instead to hop on board the Net-Zero Banking Alliance train. It seems like they opted for the easy path, avoiding commitment and pushing the boundaries of their carbon footprint.

In a surprising turn of events, even German insurance giant Allianz has chosen to leave SBTi, leaving us wondering why. Allianz claims to be cozying up to the Net-Zero Asset Owners Alliance, another U.N.-backed climate coalition it’s a part of. It seems like Allianz is always on the lookout for a new partner, with a wandering eye for climate initiatives.

It’s not the first time banks have leaned towards lowering the bar when it comes to the emissions they finance. They seem to be masters at finding loopholes. Nevertheless, this departure from SBTi could lead to less ambitious emissions targets. They say you can’t please everyone, but SBTi’s stringent standards did set a benchmark, which seems to have played a role in the banks’ decision to part ways.

So, as we navigate this messy breakup between banks and climate targets, it’s essential to remember the ultimate goal – reducing our dependence on fossil fuels. Because at the end of the day, the success of any relationship is determined by the willingness to change and grow. And in this case, the world’s future is at stake.

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