Amidst the ESG retreat, a new climate group is formed.

Amidst the ESG retreat, a new climate group is formed.
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About 120 people gathered in the brightly illuminated Guildhall art gallery in London on a damp, rainy February evening, surrounded by gold-framed paintings that ranged from realists to Pre-Raphaelites. The establishment of the Transition Finance Council was announced at the ceremony by Alok Sharma, a former UK parliamentarian who was the 26th United Nations Climate Change Conference's president-designate in 2021. The London-based group, which consists of banking executives, wants to mobilize the City of London, businesses, and legislators to increase funding for domestic and international decarbonization initiatives. The goal is to "make sure London is positioned as a leading financial centre for transition financing" and to "provide at least according to Sharma's speech, "scale the finance to transition the global economy" to cleaner energy sources. As Sharma noted, a comparable event was held in the same facility nearly five years ago today. For the introduction of the so-called private finance agenda for COP26, the UK government and the Bank of England had mobilized six times as many individuals. There was more commotion at that meeting. According to Sharma, the room was "packed to the rafters." Legendary broadcaster and biologist David Attenborough was interviewed by Mark Carney, the governor of the BOE at the time. 
The European Central Bank's president, Christine Lagarde, called in. It was "the moment when discussions about climate action and sustainable finance moved from being a [corporate social responsibility] issue to being a C-suite issue," Sharma said. A year later, Carney introduced the Glasgow Financial Alliance for Net Zero, an industry initiative uniting firms with more than $70 trillion of assets to accelerate the transition to net zero. Much, of course, has changed since then. Starting in December, all of the largest US and Canadian banks began fleeing the Net-Zero Banking Alliance, itself once part of the broader GFANZ framework. And last week, Australia's Macquarie Group Ltd. said it too was retreating from the coalition. The defections occurred as financial institutions seek to avoid right-wing attacks on sustainability and renewable energy, a US Republican-led war on behalf of the oil industry that's only intensified with Donald Trump's return to the White House. The insurance sector's climate alliance also has been discontinued, while a similar group in the fund-management industry is on pause as it seeks to ensure that it remains "fit for purpose." There's "a lot of turmoil," said Nina Seega, director of the Centre for Sustainable Finance at the Cambridge Institute for Sustainability Leadership. "Rhetoric is shifting and climate denial is becoming much more mainstream, so you then see a shift in the way different financial institutions are dealing with that." Some are under more pressure than others, she said, but "none are immune.
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 Last week, a few minutes before Sharma took the microphone to announce the Transition Finance Council's formation, one chief sustainability officer (CSO) of a large UK-based investment manager was asking attendees who they thought would be the next company to retreat from net zero. The query wasn't surprising. CSOs face a more difficult landscape these days, what with big firms like JPMorgan Chase & Co. and BlackRock Inc. quitting climate-finance groups. On Wednesday, HSBC announced it's pushed back its deadline to meet a number of key climate targets by two decades. As more companies back away, there are serious questions about the financial industry's long-term commitment—and capacity—to help slow increasingly catastrophic global warming. Forced to battle headwinds both inside and outside their firms, many CSOs are concerned they may no longer have the full support of their companies and leadership teams. "Finance is being politicized, if not weaponized," said Clemens Calice, a former Goldman Sachs Group Inc. banker who set up his own investment and advisory firm, Cygnum Capital. "Companies are under increasing pressure to align with a side or an agenda." For CSOs, all of this amounts to a "very challenging operating environment," said James Alexander, chief executive of the UK Sustainable Investment and Finance Association. Politics and policy have "become much more fractured," making judgment calls "much harder to make." At the same time, he said, "if you're managing money, your responsibility is to consider risks, and sustainability is undeniably one of those risks." Britain stands out as a rare example of a country that's advancing on climate action. Seven of the world's 10 largest economies missed a recent deadline to file updated emissions-saving plans with the United Nations. The UK was the only one to outline a strategy for the next decade that's anywhere close to consistent with the Paris Agreement target to keep warming below 1.5C. "I'm very pleased to say" that the UK "has a government which recognizes that there is no trade-off between economic growth and the drive to decarbonize the economy," Sharma said. The country is "uniquely positioned to lead."

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