The Collapse of Green Finance Shows Net Zero is Dying

BEN PILE

According to reports in Bloomberg and the Telegraph, several major U.S.-based financial institutions have recently left the Net Zero Banking Alliance (NZBA). Yesterday, Morgan Stanley announced that it had pulled out, though offered no reason. This follows Citigroup and Bank of America both quitting the Alliance on Tuesday, and their exit follows Wells Fargo and Goldman Sachs, which both quit earlier in the month. Though it is mostly U.S.-based, this has altered the global context of climate politics immensely. So what has caused this ‘exodus’, and what happens next?

NZBA is a project of the United Nations Environment Programme’s (UNEP) Finance Initiative (FI), launched in 2021. It convenes figures, plucked from the financial sector, who agree to attempt to align the interests of major financial institutions towards climate outcomes. It is the fruit of financial news media tycoon Mike Bloomberg’s UN entryism, and his underling, former Governor of the Bank of England and Bank of Canada, now manager of Bloomberg’s business empire, Mark Carney. Bloomberg and Carney are respectively UN Secretary General Antonio Guterres’s Special Envoy on Climate Ambition and Solutions and Special Envoy for Climate Action and Finance.

“Make no mistake,” said Mark Carney at the 2021 COP26 meeting, announcing the work of a new constellation of agreements, agencies, organisations and affiliations under the Glasgow Financial Alliance for Net Zero (GFANZ), “the money is here”. The expression had at least two meanings. First: the money was in the room and was hitched to the climate cause; second: the funds are available. As then Chancellor of the Exchequer Rishi Sunak explained, GFANZ, which seemingly included NZBA, aligned financial institutions with $130 trillion of assets under management. The world’s great banks and funds had seen the sense of limiting CO₂ emissions and keeping the planet’s warming to under 1.5°C, according to the Bloomberg-Carney rhetoric.

It is a remarkable transformation since the global financial crash of 2008. Within little more than a decade, the world’s banking billionaires and financial institutions had been transformed from the unregulated crooks that had caused widespread chaos into savers of the planet. Such a rehabilitation ought to strike us as odd. And the basis of their alignment, too, ought to be checked against what would have previously indicated collusion to financial regulators, whose standing orders were to keep a check on financial power.

Few checks were forthcoming, however, for very obvious reasons. Carney himself, note, had been the chief of not one but two central banks – the Banks of England and the Bank of Canada. And Carney, as I have mentioned often, installed Bloomberg as the chair of the G20 Financial Stability Board’s Task Force on Climate-Related Financial Disclosure (TCFD). A central plank of these climate alliances was the standardisation of ‘disclosure’ metrics, akin to credit ratings, that would enable investors, regulators and the public to gauge members’ climate ‘risks’ and performance, forming the fundamental mechanism of ESG. The Bank of England, for its part, effectively became a green campaigning NGO, espousing the belief that climate change was the world’s greatest “risk” to “financial stability” – an orthodoxy that was spread around the West’s financial agencies thanks to the U.K.’s influence, Bloomberg’s (and others’) money, the mobilisation of ersatz ‘civil society’ organisations and the leverage of intergovernmental and UN agencies, also under Bloomberg and Carney’s influence.

Any lingering suspicion that climate change might not be the ‘greatest risk to financial stability’ was confirmed almost as soon as the alliances such as GFANZ and NZBA were formed. COP26 came amid the radical increases in energy prices that peaked over the next nine months. Blamed falsely on Russia’s invasion of Ukraine, these prices were the inevitable consequence of the money-printing and lockdowns of the Covid era. When economic normality returned, the inflation bit hard. Demand rose as people began to rebuild their lives, but much capacity had been mothballed and the world’s energy producers struggled to increase capacity. This problem was worsened by the fact that ESG and the Net Zero agenda had increased the cost of capital for hydrocarbon energy projects and made investing in such companies socially-unacceptable.

The problem ought to be obvious. The “commitment” that NZBA requires of its members includes ensuring that “the operational and attributable greenhouse gas (GHG) emissions from their lending and investment portfolios… align with pathways to Net Zero by 2050 or sooner”. That may sound bland enough, but it requires financial institutions to withdraw services from companies that deliver completely legal, and as we have learned the hard way, extremely important services and commodities: energy. Consequently, banks and others, having signed up to the alliances, and facing pressure from activist shareholders, proudly announced that they would no longer be providing any services, from credit to underwriting, to companies involved in oil, gas and coal.

In other words, though global climate politics had failed to produce a one-size-fits-all emissions-reduction agreement, and national climate politics failed to achieve any progress towards radical emissions-reduction in most countries, the financial system itself was being turned into a form of government.

And this development was not confined to climate. If the complex world of alphabet agencies and organisations and the rules around the financing of commodity production makes your head dizzy, all you need to understand is that this is the same movement that debanked Nigel Farage and countless others. It wasn’t enough to stop oil companies, you see. The transformation of financial institutions into shadow governments was comprehensive. And people who disagreed with any part of the ideological agenda that woke banks hid behind had to be cancelled. No cash for you, deplorables.

This alliance, however, was founded on deeply irrational premises. Not just the woke stuff. The green claim has long been that green energy is not just good for the planet, but is economically sound and good for investors and consumers alike. But the data are now in. Many countries, including the U.K., have now had several decades of data from their experiments with renewables. As Bjorn Lomborg points out in the Wall Street Journal this week, “The notion that solar and wind power save money is an environmentalist lie.” Data from the International Energy Agency, reports Lomborg, show unquestionably “a clear correlation between more solar and wind and higher average household and industry energy prices”. Moreover, claims to the contrary have depended “on bogus maths that measures the cost of electricity only when the sun is shining and the wind is blowing”. We knew all that already, of course. But it is becoming news to central banks, financial regulators, investors, financial institutions themselves, journalists and politicians.

And so the inevitable happened, and financial institutions are pulling out of the alliances. In angry copy throughout the world’s press, this has been blamed on Republican lawmakers in the USA working at both state and federal levels. This accusation is not entirely without a basis. But its implicit claim of partisanship is misleading.

The Telegraph reports that, “Last month Texas moved to sue BlackRock, Vanguard and State Street over allegations they breached competition rules with environmental, social and governance (ESG) investment policies intended to suppress the supply of coal.” The allegation from Texas AG, Ken Paxton is that three institutions, BlackRock, State Street and Vanguard, had used ESG vehicles to “artificially constrict the market for coal through anticompetitive trade practices”. In other words, the rules of the climate alliances allowed something that had previously been prohibited by regulators to go unpunished: price fixing. By colluding to restrict the supply of coal, banks get a nice big green tick on their ESG scoresheet, increasing their value to ESG investors, but also give them a competitive advantage in the very same market.

It’s a serious offence. And it is one of many such irrationalities that ESG and climate has produced. In 2023, controversy was ignited by the fact that ratings agencies had given tobacco firm, Philip Morris, an ESG score of 84, whereas Elon Musks EV brand, Tesla, had a score of just 37 out of 100. Nasdaq adds that “Tesla also scored lower than fossil fuel companies like Shell and Exxon”, and more pertinently that, “Given the growth in ESG funds and influence of asset managers like Blackrock, stocks with higher ESG scores are the recipient of increased inflows.” In other words, big institutional investors and billionaires can make a move on large companies, use their large stakes and green ideology to press for ESG policies at board level, and then flog their stakes at an increased price and move on, leaving their investors with a bumper payday and the firms facing reality with an irrational business plan – a “pump and dump”.

It may well be the imminent Trump Presidency that has prompted these exits from the climate alliances. But it is simply normal forms of scrutiny and application of the law to financial institutions that Republican lawmakers and Attorneys General are calling for, not party political interventions. Even Reuters cannot hide the truth of the matter, despite putting a green slant on the development, reporting “accusations that any move to limit finance to fossil fuel companies could breach antitrust rules”. The report quotes green activists: “These exits reveal the inadequacy of voluntary commitments and underscore the urgent need for state-level leadership and regulation.” Well, indeed. If oil, coal and gas are to be banned, then it should be a decision of government, not cartels. But the problem for greens is, as always, democracy. And the victory of the Trump campaign, which promises to end the “scam” of the Biden administration’s Green New Deal, among other things, answers the greens decisively.

Firms and their investors can take their own risks without our tears. But the aggregate effect shapes our lives profoundly. The bending of rules to fit the needs of a green ideological agenda that cannot be achieved through democratic processes has pushed prices up and destroyed industries and jobs. The news from the USA is just the tip of the iceberg. And unfortunately, for the moment, European and British financial institutions are yet to depart from the cartel. Europe remains the centre of ESG investing, supported by a constellation of policies drafted by ideological zombie politicians and blind-eyed regulators and championed by supine journalists.

However, growth in ESG global seems to have gone into reverse. Though recent analyses of ESG investing have been bullish, they have reported a substantial decline from the days of COP26. Just $10.4 billion net of new money found its way into ESG funds in Q3 2024 – a far cry from the $130 trillion claimed by Carney in Sunak in Glasgow. No doubt, the U.K. and EU Governments will attempt to use regulation to avert the reality of poorly performing green firms, alongside the continent’s broader deindustrialisation and economic woes, with endless incantations about ‘green growth’ and green jobs. Expect more poison as remedies. But markets, as daft as they can be, will be sensitive to increased scrutiny in the USA, where levels of ESG investing are far lower, and where energy realism is about to become a political priority once again, displacing empty green hyperbole. Only more irrational regulations and legislation can sustain Europe’s financial institutions’ estimated $2.75 trillion ESG investments. The only question that remains is how long they can keep it up in the face of the dawning reality.

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This article (The Collapse of Green Finance Shows Net Zero is Dying) was created and published by Daily Sceptic and is republished here under “Fair Use” with attribution to the author Ben Pile

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