Wall Street is walking into a new era of risk that has bankers, lawyers and climate campaigners reaching for a different playbook.
As the world awaits the final result of the US midterms, the finance industry is trying to figure out how vulnerable the outcome will leave it. That’s as Republicans plan a new wave of antitrust action against firms perceived to be playing an active role in reducing greenhouse gas emissions.
Nigel Topping, who co-leads the United Nations-backed Race to Zero Campaign, called it the “political weaponization of the reality of climate change.”
“And that’s leading to some mad lawsuits,” he said in an interview in Sharm El-Sheikh, Egypt, during the COP27 climate summit. Unlike last year, the event drew hardly any Wall Street chief executives, with heavyweights including BlackRock Inc.’s Larry Fink opting to stay away.
The GOP says it’s targeting “ESG collusion.” In letters sent to a group of lawyers just before the midterms, Senators Tom Cotton, Michael Lee, Charles Grassley, Marsha Blackburn and Marco Rubio said firms supporting environmental, social and governance goals should brace for “investigations” over “the coming months and years.”
Topping, who in 2020 was appointed as UK High Level Climate Action Champion and has played a key role in shaping the principles that guide the world’s biggest climate-finance coalition — the Glasgow Financial Alliance for Net Zero — said antitrust concerns ultimately forced him and his colleagues at Race to Zero to remove language that would have compelled GFANZ members to phase out their financing of the fossil-fuel industry.
“We had to make one very tiny correction because we got some legal counsel that said that a particular choice of words was problematic from an antitrust point of view,” he said. “So we changed it with exactly the same scientific intent, but with language which very clearly doesn’t fall foul of that.”
After that revision, GFANZ members were free to follow their own path to net-zero emissions, rather than be subject to binding restrictions on the financing of oil, gas and coal. Mark Carney, the chief architect and co-chair of GFANZ, recently spelled out the challenges to UK lawmakers. (Michael Bloomberg, founder of Bloomberg News parent Bloomberg LP, is also co-chair of GFANZ.)
“There is an important difference” between setting common requirements and individual goals, he said Oct. 24 during a hearing of the UK’s Environmental Audit Committee. It “certainly raises important antitrust concerns,” which is why Race to Zero’s language “had to be adjusted,” he said.
Those adjustments helped keep JPMorgan Chase & Co., Morgan Stanley and Bank of America Corp. in the GFANZ sub-unit known as the Net Zero Banking Alliance, according to people familiar with the matter. “My full expectation is that all those alliances are still in the Race to Zero in a year’s time,” Topping said.
Similar subtle adjustments are being made elsewhere across the finance industry as bankers and asset managers try to avoid litigation. The new atmosphere means that even stray comments can suddenly be held against firms.