Time for bank holdouts to join Carney's green club

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Mark Carney speaks after delivering the Michel Camdessus Central Banking Lecture in Washington, U.S., September 18, 2017. REUTERS/Joshua Roberts

LONDON, Oct 8 (Reuters Breakingviews) - It’s time for Jamie Dimon, Charlie Scharf, Andrea Orcel and David Solomon to take one for the team. The bosses of JPMorgan (JPM.N), Wells Fargo (WFC.N), UniCredit (CRDI.MI) and Goldman Sachs (GS.N), respectively, head the last of the big western financial groups yet to sign up to the so-called Glasgow Financial Alliance for Net Zero, an umbrella organisation that requires members to set meaningful decarbonisation commitments. As they mull joining, these holdouts may want to recall 2008.

Back then, as the world’s financial system teetered, JPMorgan and Wells Fargo were getting heat from the United States government to accept state capital via the so-called Troubled Asset Relief Program (TARP). Dimon and Scharf’s predecessor at Wells Fargo didn’t initially see why their banks, which they deemed sufficiently healthy and able to absorb troubled rivals, should accept bailouts they didn’t need. An eventual change of heart was integral to the U.S. scheme succeeding in stabilising markets.

Fast forward 13 years, and Dimon is the highest-profile banker dragging his feet in joining GFANZ. He has his reasons. JPMorgan this year launched a $2.5 trillion, ten-year financing target to support sustainable development, and has a plan in place to help clients in the heaviest emitting sectors like oil and gas to decarbonise. It may not help that Dimon has in the past crossed swords on regulatory requirements with Mark Carney, the former Bank of England governor heading up GFANZ.

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It's quite possible Goldman, Wells Fargo, UniCredit and Intesa Sanpaolo (ISP.MI), another large holdout, will sign up before November’s key COP26 conference in Glasgow. But having JPMorgan on board would be a powerful endorsement. It’s America’s top bank, with a $500 billion market value.

Just as the stabilisation created by TARP ultimately helped all its participants, so too could GFANZ help the current holdouts. Members, which also include asset managers, insurers and financial plumbing players like Moody’s, have to submit decarbonisation plans with actual teeth. That means factoring in the full scope of their emissions, transparent reporting, and setting short- as well as long-term carbon reduction targets.

The downside of doing all this is that it may at the margin reduce strategic flexibility. But if every other major U.S. and European bank joins GFANZ, JPMorgan, Goldman and the rest will be benchmarked against them whether they like it or not. They should grit their teeth and think of the TARP.

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CONTEXT NEWS

- UN Special Envoy on Climate Action and Finance Mark Carney launched the Glasgow Financial Alliance for Net Zero (GFANZ) on April 21.

- GFANZ at launch featured 160 firms, together responsible for assets in excess of $70 trillion, from the leading net-zero initiatives across the financial system to accelerate the transition to net-zero emissions by 2050 at the latest.

- All GFANZ member alliances must use science-based guidelines to reach net-zero emissions, cover all emission scopes, include 2030 interim target setting, and commit to transparent reporting and accounting in line with the UN’s Race to Zero criteria.

- Forty-three banks from 23 countries, with assets of $28.5 trillion, also joined the newly announced Net-Zero Banking Alliance, part of GFANZ, with its members committing to align operational and attributable emissions from their portfolios with pathways to net zero by 2050 or sooner.

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Editing by Rob Cox and Karen Kwok

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