In the past few months there have been some noteworthy developments for the global alliance known as GFANZ (Glasgow Financial Alliance for Net Zero).
GFANZ, founded by Mark Carney and Michael Bloomberg in the spring of last year and promoted at COP26, is the world’s largest (US$150 trillion) coalition of 500 financial institutions committed to transitioning the global economy to net zero greenhouse gas emissions.
But already, some of the organizations have been questioning their membership in the Alliance.
In October, GFANZ lost two pension funds and a consulting company. Major U.S. banks including JP Morgan Chase, Morgan Stanley and Bank of America have also been considering exiting. Even some Canadian banks are having second thoughts about their membership in the alliance.
So why have these big players been considering leaving? Because of stringent Race to Zero policies that have a specific requirement to withdraw funding from fossil fuel companies.
These banks know that this will come with potential legal, reputational and governance risks. It also makes no financial sense when demand for oil and gas around the world is only increasing.
Now is not the time to sign on to a pledge of divestment, when issues of energy security and energy poverty can be helped by investment in the oil and gas sector.
As a result of the threatened departure of some members, GFANZ now says that going forward, members will be “encouraged, but not required, to partner with the Race to Zero”.
As JP Morgan Chase Bank CEO Jamie Dimon said told congressional hearings on Capitol Hill in September, “we will not refrain from making new investments in major oil and gas development projects.”
He went on to tell the members that JP Morgan Chase would “absolutely not stop investing in oil and gas because that would be the road to hell for America.” Instead, he said, “the world needs proper investing in the oil and gas complex”.
Dimon’s words apply equally to Canada, where divestment in the oil and gas sector would also be the road to hell. Investment and support for the sector should be top of mind for Canadian bank CEOs right now for four important reasons:
- The oil and gas industry’s wellbeing is essential to the wellbeing of Canadians, ensuring energy affordability and with it the affordability of everything else necessary to a reasonable standard of living for all in Canada;
- The sector’s environmental performance is world-leading and steadily improving;
- Its expansion is increasingly important to addressing global concerns such as energy security and energy poverty; and
- A lack of investment in Canada means more investment in oil and gas sector development in other parts of the world with poorer environmental performance, poorer corporate governance, and serious human rights infringements.
The divestment agenda and pledges to divest from the oil and gas sector like the Race to Zero must be rejected, especially in Canada where the industry is the backbone of the Canadian economy.
Adopting a pro-investment stance in Canadian oil and gas is good for the economy, the environment, innovation, financial institutions, shareholders, and everyday Canadians.
Gina Pappano is the former head of market intelligence at the Toronto Stock Exchange. She is executive director of InvestNow Inc., a non-profit dedicated to demonstrating that investing in Canada’s resource sectors helps Canada and the world. Join the movement and pass the InvestNow resolution at investnow.org.
The unaltered reproduction of this content is free of charge with attribution to Canadian Energy Centre Ltd.