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Major US and Canadian Banks Exit NZBA

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The six largest US banks, JPMorgan, Goldman Sachs, Wells Fargo, Citi, Bank of America, and Morgan Stanley have each announced their departure from the Net-Zero Banking Alliance (NZBA), a group of leading global banks committed to aligning their lending, investment, and capital markets activities with net-zero greenhouse gas (GHG) emissions by 2050. In Canada, TD, BMO, and National Bank announced their withdrawal from the NZBA earlier today. RBC has also indicated that it is open to leaving the alliance. We anticipate significant changes in the NZBA and additional withdrawals over the coming days. Major US asset managers are also leaving other UN-convened climate coalitions, including the recently announced departure of BlackRock from the Net Zero Asset Managers initiative (NZAM), a multi-trillion dollar international group of asset managers committed to supporting the goal of net zero GHG emissions by 2050. Following BlackRock’s departure, a statement issued by NZAM on Monday indicates that it is suspending activities while the initiative undergoes review “to ensure NZAM remains fit for purpose in the new global context.” Both NZBA and NZAM are organizations under the umbrella of the Glasgow Financial Alliance for Net Zero (GFANZ), co-chaired by Michael Bloomberg and Mark Carney.    For further information or to discuss the contents of this bulletin, please contact Lisa DeMarco at lisa@resilientllp.com.

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Global Risk Institute Publishes Paper on Climate-Related Risks for Financial Institutions

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The Global Risk Institute (GRI) yesterday published a paper titled “Climate-Related Legal Risks for Financial Institutions: Executive Brief” (the “Paper”), authored by Dr. Janis Sarra with the Canada Climate Law Initiative and Resilient LLP’s Lisa DeMarco. The Paper provides an overview of the many risks now faced by the financial sector including regulatory liability, securities law litigation, fiduciary duty risk, professional indemnity insurance risk, “greenwashing” litigation, commercial contract risk, litigation against governments, and civil lawsuits. The Paper also provides “best practice tips” for financial institutions, risk managers, and board risk committees to consider and implement as a means to limit their liability and reduce their climate-related risks. These recommendations include, among others: Undertaking a high-level assessment of litigation exposure across loan and policy books, investment portfolios, and operations; Embedding management of climate-related risks as part of core business risk management; Investigating and disclosing climate-related vulnerabilities in investment portfolios; and Creating an action plan to reduce Scope 1, 2, and 3 carbon emissions as evidence of a financial institution’s due diligence in addressing climate-related financial risk. The first page of the Paper appears below. The full text of the paper is available on the Global Risk Institute website here. For further information or to discuss the contents of this bulletin, please contact Lisa DeMarco at lisa@resilientllp.com.

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Network for Greening the Financial System Releases Updated Climate Risk Scenarios for the Financial System

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The Network for Greening the Financial System (NGFS) last week released an update to their climate scenarios which assist financial institutions with analysing climate-related risks to the economy and financial system (the Study). The NGFS is a group of 91 central banks (including the Bank of Canada, US Federal Reserve, and European Central Bank), supervisors, and observers that seek to share best practices and contribute to the development of climate risk management in the financial sector, and to mobilize mainstream finance to support the transition toward a sustainable economy. This bulletin provides a high-level summary of the Study’s key findings: Transition risks: Emission prices. The Study indicates that a price of $160/tonne CO2e will be required by 2030 to incentivise the transition to net zero by 2050. Energy investment. Greater investments in renewable energy and storage will be necessary to meet net zero goals by 2050, with substantially reduced investments in fossil fuel extraction. The Study suggests that, by 2050, renewables and biomass will account for 68% of global energy needs, with fossil fuels (coal, oil, and gas) providing close to 25%, down from approximately 80% in 2020. CO2 removal. The Study assumed low to medium availability of carbon removal technology and storage such as increasing forest cover, soil sequestration, and growing crops for bioenergy with carbon capture and storage (BECCS). The Study suggests that CO2 removal would help to accelerate decarbonization goals and lower warming outcomes but on a limited scale. Agriculture, forestry and land use. Changes in land use will be important for the pathway to net zero by 2050, including increasing forest cover and bioenergy cropland and reducing cropland for food production and pasture land. The Study notes that CO2 emissions are anticipated to decline more quickly than other greenhouse gases including N2O and CH4. Physical risks:…

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