In April 2021, the United Nations established the Net Zero Banking Alliance. The Alliance was a collection of banks whose CEOs all signed a “commitment statement” under which they agreed to align their lending and investment portfolios “with pathways to net-zero by mid-century, or sooner, including CO2 emissions reaching net-zero at the latest by 2050.”
The commitment statement reads more like a religious manifesto than a banking prospectus. According to the United Nations “Banks play a key role in society. As financial intermediaries, it is our purpose to help develop sustainable economies and to empower people to build better futures.”
All four of Australia’s major banks are members of the net zero banking alliance. Under the terms of their membership, they have agreed to limit finance to coal mining, directly hurting Central Queensland. Some banks, like Westpac, have even started limiting business with farmers based on their climate and deforestation record.
I am not sure about other countries, but in Australia our banks have been guilty of charging fees to dead people, forging the signatures of pensioners and manipulating financial markets. I am not sure why the United Nations thought it worthy to appoint our banks, with this record, as moral guardians of the galaxy but here we are.
This week it is likely that Donald Trump, as the 47th President of the United States, will remove America from the Paris Climate Accord and thus formally end the United States’ commitment to net zero emissions by 2050. Ahead of this, most major US banks have decided to leave the Net Zero Banking Alliance, including Bank of America, Citigroup, Goldman Sachs, JP Morgan Chase, Morgan Stanley and Wells Fargo.
The world’s largest investment fund manager, BlackRock, has also left.
Before the Australian Government signed up to net zero emissions in late 2021, we were threatened that if we did not sign up that international banks would not lend to us, and therefore our interest rates would rise. Well, when we signed up to net zero the 10 year Australian Government bond yield was 1.4 per cent. Today, it is 4.5 per cent. Signing up to net zero has not kept interest rates down.
Now with major global banks leaving the initiative, Australia risks getting left behind if we stay committed to an out-of-step, out-of-date net zero agenda. At the last climate conference, China, India and Indonesia did not sign up to the final communique because they are continuing to build new coal fired power stations. These three countries represent 41 per cent of global carbon emissions. The US accounts for 13 per cent of global carbon emissions.
With the US likely to exit the Paris agreement, countries representing more than half the world’s emissions will no longer be committed to the climate strategies that Australia is. So why would we stay committed to an agenda that is making energy more expensive, jobs in manufacturing more precarious and our cost of living go higher and higher?
At the very least, we should no longer allow our banks to lecture us. Even before Trump was elected, 14 US states had banned banks from discriminating against agriculture or mining sectors in their lending practices.
Australia should adopt the same policy here. Our banks have a role to play in facilitating business and investment. The banks have no authority to prosecute broader social or environmental goals because they do not have the same authority as being elected by the people.
Putting banks in charge of our society creates a form of aristocracy that undermines democracy. In a democracy the people should decide what public policies are pursued and it is about time that the Australian people get a vote on whether we should stay committed to a net zero emissions agenda which most of the rest of the world is leaving.
