Lenders reluctant to end financing of new oil, gas and coal exploration projects
Banks have resisted committing to the most explicit road map for cutting greenhouse gas emissions to net zero by 2050, just weeks before the COP26 climate talks in Glasgow.
Negotiators for a Mark Carney-led initiative to encourage finance groups to stop funding fossil fuel companies have struggled to convince leading banks to agree to end financing of all new oil, gas and coal exploration projects this year, according to internal messages seen by the Financial Times.
This is aligned to analysis from the International Energy Agency (IEA).
Many of the 59 banks signed up to the former Bank of England governor's initiative prefer to adopt targets derived from research on global warming scenarios by the International Panel on Climate Change (IPCC), a UN scientific body, which is not prescriptive, and would leave room to continue oil and gas financing.
Carney's initiative, the Glasgow Financial Alliance for Net Zero (Gfanz), was formed in April, attracting support from nearly 300 financial institutions with assets of $90tn.
The IEA published its analysis in May outlining a pathway to net zero emissions by 2050 to address climate change.
"No one is willing to put their name against IEA 1.5C [targets]", said a person close to the discussions with banks.
"They think it's a fairytale." More than 190 countries pledged to limit global warming to well below 2C and ideally to 1.5C above pre-industrial levels as part of the Paris Agreement in 2015. Mark Carney, UN special envoy for climate action and finance:
"The next few weeks in this decisive decade will help determine whether we avoid climate catastrophe"
Carney's Gfanz alliance has pulled together a series of initiatives that aim to encourage the world's biggest banks and financial institutions to commit to hitting a target of net zero emissions by 2050 to limit global warming.
Next month's COP26 talks will focus on the rules for achieving the Paris Agreement, with the role of finance in climate change at the heart of the discussions. Gfanz released a call for action on Monday, asking G20 governments for a series of key policies towards achieving net zero.
These include ending fossil fuel subsidies and seeing the funds redistributed towards a "just" transition, the ban of unabated coal and oil power plants by 2040, as well as the introduction of mandatory climate reporting for all companies by 2024 and the reform of global financial regulations to incentivise green investment.
"Financial firms can't deliver sustainable economies alone clear, credible, and ambitious climate policies are needed from G20 governments," Carney, the current UN special envoy for climate action and finance, said.
"The next few weeks in this decisive decade will help determine whether we avoid climate catastrophe."
Gfanz's banking group, known as the Net Zero Banking Alliance (NZBA), which includes HSBC, Bank of America and Santander, calls on lenders to set targets around climate change scenarios put forward by either the UN's IPCC or the Paris-based IEA, the oil producer countries organisation.