Some of the world's largest banks have been pulling back from a climate coalition that aims to support them in aligning their financial strategies with green goals and the transition to an economy without heat-trapping air pollution. This mass exodus is raising concerns about what it means for customers and global climate efforts.
What's happening?
Royal Bank of Canada is the sixth major Canadian bank to withdraw from the Net-Zero Banking Alliance, a major international coalition focused on climate-conscious finance. As reported by Reuters, RBC's decision to pull out of the group follows similar exits by other financial institutions, which could be concerning for the future of climate commitments in the banking industry.
This exodus comes after several U.S. banks also withdrew from the coalition. Some experts believe the trend is influenced by a political shift in the U.S. and shows that Wall Street is deprioritizing climate goals.
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Definitely 👍 Why is it concerning that banks are leaving climate coalitions?
Banks have a lot of power (since they control large amounts of money) to influence the transition to a more sustainable economy. In fact, the six Canadian banks that withdrew control over 80% of the country's assets. With this capital, they can invest in green initiatives and reduce funding for industries that are bad for the environment.
While the banks say they aren't throwing out their climate goals, withdrawing from the coalition could slow things down. This is problematic for customers who prefer to financially support green industries.
On top of that, it could hinder international efforts to transition away from dirty energy sources and reduce emissions. Climate change affects everyone — as the planet continues warming, we've seen more extreme weather events and threats of food insecurity, which all have huge impacts on communities around the world.
What's being done about it?
Some Canadian lawmakers are trying to pass policies that would force banks to align with the country's climate goals, such as the Climate-Aligned Finance Act. Organizations like BankTrack and the United Nations Environment Programme Finance Initiative promote transparency and responsible banking practices. For example, BankTrack publishes where banks put their money to keep customers informed, and the UNEP Finance Initiative supports financial institutions in setting and achieving sustainability goals.
Investors and everyday consumers can help by putting their money toward climate-positive industries by investing in clean economy stocks. Rather than investing through the bank, customers could switch to venture capital firms that prioritize green investing. Customers can also influence banks by using their purchasing power and choosing institutions that commit to sustainability goals.
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