November 9 is Finance Day at COP 27, which means the UN’s leading climate change conference will focus on the financial sector’s role in curbing climate change through regulatory policies from government agencies, voluntary commitments from the private sector, and more.
With Finance Day falling just one day after the US midterm elections, the outcome of the election should begin to shed light on whether the next Congress will focus on attempting to undo the progress that has been made in holding the financial sector accountable for its role in the climate crisis.
The Sierra Club’s Fossil-Free Finance campaign works closely on these issues, including pushing major financial institutions like US banks and asset managers to reduce their investments in fossil fuels, and encouraging US regulatory agencies like the Securities and Exchange Commission to hold public companies and asset managers accountable for how they communicate climate risk to investors.
Here’s a rundown of the latest news, reports, and more, to help you cut through the greenwashing during Finance Day at COP 27.
Report analyzes net-zero pledges of US banks
A new report by the Sierra Club’s Fossil-Free Finance campaign released ahead of COP 27 analyzes the financial sector’s net-zero emissions pledges two years in the making, revealing that the commitments and actions from the 6 biggest US banks fall far short of what’s needed to meet global climate goals, in large part due to their continued financing of fossil fuel expansion. Read the press release & report here.
With the Net Zero Banking Alliance (NZBA) expected to release an update at COP 27 on its members’ progress toward their net-zero commitments, this new report serves as a useful, critical analysis of US banks’ own net-zero commitments, interim targets, and exclusion policies, all summarized in one place.
The report focuses on the commitments of 6 US banks — JPMorgan Chase, Citi, Wells Fargo, Bank of America, Morgan Stanley, and Goldman Sachs. It looks at the banks’ pledges to reach net-zero financed emissions by 2050, membership in the Net Zero Banking Alliance, interim 2030 targets for the oil & gas and power generation sectors, exclusion policies for high-risk sectors like coal and Arctic oil & gas, and key standards for policies to be considered credible and robust.
- Read more in Politico: U.S. banks 'severe laggards' on climate goals — report
In support of the SEC’s climate risk disclosure rule
The Sierra Club’s Fossil-Free Finance campaign submitted multiple rounds of feedback in support of the Securities and Exchange Commission’s (SEC) proposed climate risk disclosure rule, ESG disclosure rule, and fund names rule, including during a supplemental comment period that ended earlier this month.
In its initial comments on the draft climate risk disclosure rule, the Sierra Club’s Fossil-Free Finance campaign outlined its support for, and in some cases requested to strengthen, the rule, focusing on the mandatory requirement of scope 3 emissions reporting for all large companies, and disclosures about the impact that climate change is already having on a company’s financial statements. Read the comments here.
In its supplemental comments on the draft climate risk disclosure rule and ESG disclosure rule, the Sierra Club’s Fossil-Free Finance campaign highlighted recent developments that strengthen the case for comprehensive greenhouse gas emissions disclosure requirements in both rules, including the International Energy Agency’s World Energy Outlook released in October 2022. Read the supplemental comments here.
In its initial comments on the draft ESG disclosure rule and fund names rule, the Sierra Club’s Fossil-Free Finance campaign outlined its support for the rules, including preventing funds from using certain naming conventions unless the label reflects a major focus of the investment strategy, ending corporate greenwashing of funds that invest in fossil fuels but tout ESG, and ensuring funds either disclose their financed greenhouse gas emissions or state why they do not have that information. Read the comments here.
- Read more in Bloomberg Law: The Finance Industry Needs Better Climate Disclosures
- Read more on the Sierra Club website: Sustainable investing rules would help you cut polluting companies from your retirement funds
ALSO: The Sierra Club's Fossil-Free Finance campaign is closely following the recent moves by major US financial regulators to protect the financial system from climate risk. This includes the Federal Reserve's pilot project announced in November, and the Office of the Comptroller of the Currency (OCC) and the Federal Depository Insurance Corporation's (FDIC) guidance detailing their expectations for how big banks must respond to climate risks released earlier this year. Read more here.
What’s next for GFANZ after cutting ties with Race to Zero
The Glasgow Financial Alliance for Net Zero (GFANZ) announced in October that it would no longer require its members — including major financial sector net-zero alliances — to sign on to the emissions reduction criteria set by the UN’s Race to Zero campaign. The move came after US banks JPMorgan Chase, Bank of America, and Morgan Stanley reportedly threatened to leave GFANZ, and the associated Net Zero Banking Alliance (NZBA), over concerns that updated Race to Zero criteria around financing of new fossil fuel projects may make the banks vulnerable to legal challenges from fossil fuel-aligned politicians.
The updated Race to Zero criteria affirmed what has been obvious for years: in order for banks' net-zero commitments to be credible, they must explicitly commit to phase out financing for new fossil fuels. After severing ties with Race to Zero, GFANZ and its associated alliances now must decide how to guide some of the world’s largest banks toward the credible, robust, and science-aligned policies that are necessary for meeting the climate goals they have committed to.
Without explicit commitments to phase out financing for fossil fuel expansion, financial institutions will not be aligned with what leading climate scientists and energy experts tell us will be necessary to keep global temperature rise below 1.5C. Read the press statement here.
Media interviews
Ben Cushing, campaign director with the Sierra Club’s Fossil-Free Finance campaign, is available to comment from 7 a.m. - 5 p.m. ET (2 p.m. - midnight in Sharm El-Sheikh) on any financial sector announcements made at COP 27. Please contact fossilfreefinance@sierraclub.org to set up an interview.