Big Banks Are "Quiet Quitting" Their Climate Promises

https://www.bloomberg.com/news/articles/2024-04-01/big-banks-are-cooling-on-climate-change-promises

by richrichie • 2 years ago

75 39 2 years ago

bloomberg.com

alasarmas2• 2 years ago

https://archive.is/xVCPL

gary_0• 2 years ago

Your link doesn't work for me. The article is still blocked.

leereeves2• 2 years ago

Do you use 1.1.1.1 for DNS? archive.is links don't work for me because archive.is refuses to work with that DNS.

alasarmas2• 2 years ago

You’re right. I can’t edit that comment anymore, but this link should be fixed:

https://archive.is/7kHer

richrichie6• 2 years ago

Podcast version here: https://open.spotify.com/episode/71CRr8vnJ9YJrdnrZEWOZV?si=D...

rendaw2• 2 years ago

Couldn't read the article. Of all fields though, I wouldn't expect banks to be big climate affectors in the first place. Is this maybe related to compute costs for trading? Or investing in climate-positive ventures?

tmnvix• 2 years ago

Probably more to do with not investing in climate-negative ventures.

rendaw2• 2 years ago

I'm getting downvoted, I _presume_ because of not reading the article. Is it expected to read paywalled articles posted here? I'm curious about the context but I'm not going to subscribe to bloomberg to read 1 article every 5 years. I wouldn't have posted this, but I was not expecting any downvotes here...

Larrikin• 2 years ago

There are dozens of ways to read the articles.

Posting to complain you can't read or even worse posting to complain about the source of something you didn't read is worthless to everyone including the people who didn't read the article

JumpCrisscross• 2 years ago

Is it expected to read paywalled articles posted here?

It's against the guidelines to complain about paywalls in comments.

hestefisk• 2 years ago

Banks lend to polluters.

Biologist12310• 2 years ago

This was very good. I’ve been working at the intersection of climate and finance for nearly 20 years, and I would add the following points to augment the story told in the podcast (article available on Apple Podcast).

1. Banks have enormous power to determine what the future looks like. This is exercised via licence to make loans (and issue money) from nothing more than a ledger entry. That loan or ledger entry often dictates the future as without credit projects don’t happen and business operations aren’t viable.

2. On a neutral reading, asking banks to change their practices is a bit like asking Kodak to make digital cameras. Banks are wired for issue of loans using their existing risk analysis tools. Adopting to a new world in which they must onboard new tools to assess climate risk is like asking Nokia to make a good smartphone.

3. On a less neutral reading, banks have a fiduciary duty to their shareholders over and above the well-being of a wider group of stakeholders. Add in that banks are staffed with employees very focused on material and financial gain, so the legal obligations are reinforced with internal cultural expectations. Banks are filled with people who don’t really want to undermine their very lucrative hustle.

4. Banks claim that they need government support and regulatory change to help them make an adjustment and level the playing field to make climate action viable. But they lobby against precisely those statutory changes that are needed. A climate catch 22.

toast0• 2 years ago

On a neutral reading, asking banks to change their practices is a bit like asking Kodak to make digital cameras. Banks are wired for issue of loans using their existing risk analysis tools. Adopting to a new world in which they must onboard new tools to assess climate risk is like asking Nokia to make a good smartphone.

I don't understand this whole thing. Kodak pioneered digital cameras. Nokia made several good smartphones.

Biologist12310• 2 years ago

Maybe those aren’t the strong examples I believed them to be. My understanding was that both Kodak and Nokia struggled to adapt to the requirements of a new age, which is the point I’m making about banks, that like many businesses, they are not wired for change.

richrichie6• 2 years ago

The problem here are two fold: 1. benefits of climate change are more like public good 2. as elsewhere many firms went crazy with green washing and ESG is kind of becoming a loaded phrase in corporate speak

On 1, private action won’t work unless the govt somehow pays the private actor. So, blaming banks is less effective.

Biologist12310• 2 years ago

Thank you for the opportunity to exchange views on this. I’m currently trying to write up my professional experience. I’m finding it challenging, but your response and the dialogue helps me sharpen my own understanding and thinking.

Most of my career has been spent building mechanisms to pay the private actor as you suggest. It works well at one level. But the problem is that there isn’t enough government money in the world to pay off all private actors needed to get to sustainability. The other thing to recognize is that banks create money far more than governments do, and they create it to finance projects which likely destroy more wealth than they create: just not wealth in a strict financial sense. Is blaming banks ineffective? The blame probably lies with the system which allows banks to determine the future, and to make that determination on the basis of what creates narrow financial value to a small group of insiders to the exclusion of other values such as environmental, good relations between people etc.

I don’t have any beef with the bank mandate per se, their social utility is the allocation of resources to what society finds most useful. But that valuable mechanism breaks down if non-financial values are excluded from credit-scoring systems.

ZeroGravitas2• 2 years ago

ESG is kind of becoming a loaded phrase in corporate speak

Yeah, the people who sell fossil fuels, and the politicians they finance are really annoyed at ESG for some reason.

credit_guy6• 2 years ago

Adopting to a new world in which they must onboard new tools to assess climate risk is like

But what exactly are you even asking the banks to do? A green company suffers from the same climate risk as a regular company. Yes, a loan to a green company might reduce the global climate risk, but do you see how you've got a prisoner's dilemma here? A bank that gives a green loan below market rate is basically subsidizing the green transition. That's laudable, but that bank has to compete with other banks that don't make such subsidies.

It almost feels like stating a truism: subsidies should come from governments, not from for-profit corporations.

Maybe you deplore the whole "for-profit" thing, but that's a dangerous direction to go to. It has been tried before, a number of times, and it did not look that rosy in the end.

It's best to work with what you've got: people do business to make a profit. They are not hell bent to destroy the world, but they don't have a motive to save it either. Let them do business, and we as a society we'll take care of saving the world via government action, or via charitable NGOs.

Biologist12310• 2 years ago

But what exactly are you even asking the banks to do?

I don’t think I’m asking banks to do anything in that comment.

What I am trying to do is set out a problem statement, and given your knowledge (and handle), I’d greatly appreciate your input on it:

1. Banks have a powerful ability to determine which projects happen and which don’t through the credit mechanism. Because often times no credit = no project.

2. When projects are evaluated on narrow financial criteria, wealth can be destroyed rather than made. The project will create free cashflow and the loan will be repaid, but the credit issuance process will not take into account whether the project is a net benefit to human wealth across other important metrics such as environmental and human heath.

3. To avoid the competition issue, governments could regulate to change market rules, but banks themselves frustrate this by lobbying against change.

If we have agreement on a problem statement, then we are in a position to discuss responses. Your response might well be do nothing, but that should be justified to be credible.

incomingpain• 2 years ago

Absolutely correct that they are now quitting these promises.

I would go further. Entities which arent banks like blackrock or for that matter countries are also quitting these promises. Recently withdrawing from the United Nations climate alliance. Largely speaking blackrock's move to withdraw from these resulted in massive losses to the "ESG" indexes.

https://www.reuters.com/business/environment/germanys-climat...

Germany for example in a major energy crisis had to choose fossil fuels and sign on to multidecade contracts dispelling any thoughts they will continue with climate efforts.

Here in Canada, the next election is October 20, 2025 unless they can prove Canada has been invaded by a foreign nation or that there's an ongoing rebellion. They are even still obligated to receive approval from the conservatives(2/3rds vote) to postpone the election. Which I very much doubt will ever happen. Upon winning, the conservatives plan to scrap basically all climate initiatives especially the carbon tax.

Though the Canadian part of 'extinction rebellion' which really is just the same people behind the oil blockades in 2020 has asserted they will be forced to be that rebellion to prevent the conservatives from coming to power.

I wonder if the threats are legitimate.

Big Banks Are "Quiet Quitting" Their Climate Promises

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