From September 21 to 27, participants from businesses, governments, not-for-profit entities, and interested individuals from around the globe participated in the world’s largest climate summit of 2020, Climate Week NYC. Over 400 events took place throughout the week, framing a diversity of conversations around resilience, rebuilding from the coronavirus pandemic, the pursuit of a net zero future, and the critical challenges we will face over the next decade. Confluence Philanthropy addressed these challenges by highlighting and exploring the responsibility held by banks, and the opportunity for climate solutions housed in the financial sector.
Many of the largest global banks have expressed support for the Paris Agreement. However, the majority of these banks are working against the agreement by underwriting new fossil fuel infrastructure. US banks have invested $1.9T in the fossil fuel industry since the Paris Agreement was signed in 2016.
To delve into this dynamic, we heard from panelists Matthew Slovik, Managing Director and Head of Global Sustainable Finance at Morgan Stanley; Trenton Allen, Managing Director and CEO, Sustainable Capital Advisors; and Danny S. Growald, Co-Chair, BankFWD. Marilyn Waite, Program Officer in Environment at the William and Flora Hewlett Foundation, served as moderator, deftly steering the discussion towards what each panelist could contribute to the decarbonizing challenge.
Unbeknownst to us, two days earlier to kick off Climate Week, Morgan Stanley announced they have increased their climate commitment to reach Net-Zero Financed Emissions by 2050. Panelist Matthew Slovik was an architect of this commitment, which gave timely insight into the ensuing discussion.
Matthew described the scope and significance of Morgan Stanley’s new commitment to net zero emissions, which sparked a spirited dialogue around mobilization strategies for banks to decarbonize. Trenton outlined how foundations and investment advisors, as clients of banks, can play an important role in incentivizing banks to decarbonize their lending portfolio, and how Confluence builds that ability with our members.
“The journey to decarbonization is a complex one. We engage with clients on the institutional side where we think about innovation... Our goal is to provide solutions. To provide connections to reach goals.” –– Matthew Slovik
From Bank FWD, Danny Growald outlined the capacity that finance has to serve as a critical tool to adjust the current trajectory of climate change, emphasizing that these decarbonization strategies need to be applied meaningfully, and more quickly than our current trajectory as the consequences are so great.
“We live in a time that is faced with a challenge greater than anything other generations have faced before.” — Danny Growald
The last few months saw the momentum building behind the financial sector’s efforts to improve their climate policies. The increased attention to measuring, reporting, and slowing the flow of financing to fossil fuel companies is key. Investors, financiers, activists, citizens, bank clients, and banks themselves are stepping up to increase banks’ ambition to accelerate climate-friendly action.
To increase this momentum, Confluence Philanthropy and Bank FWD are collaborating to strategize effective ways to increase the ambition of banks and their clients to move away from fossil fuel investments. The foundational toolkit for this project is being developed by Sustainable Capital Advisors as Trenton and his team analyze pressure points within banking institutions to leverage joint interests to steer away from carbon-intensive investments. This toolkit will emphasize the power of collective mobilization and highlight the goals to incentivize banks to step up to take leadership in the urgent pursuit of climate action.
Morgan Stanley is a great example of such leadership and, although there is significant work to be done, is taking steps in sustainability that place them as pioneers in the space. By joining the Partnership for Carbon Accounting Financials (PCAF) Morgan Stanley is leaning into corporate climate action and supporting the development for a metric through which decarbonization can best be assessed.
This metric, and the developing methodologies from PCAF, served as a pivotal piece of the event’s discussion. From the increasing establishment of reporting protocols comes the certainty and accountability required to justify full mobility in investment strategy, but the uniform development of this system is takes time – time that we may not have to spare. Our panelists acknowledged this dichotomy and provided insights that steps must be taken now, with efforts consistently increasing, if we are to make the changes necessary to solve the crisis at hand.
“One of the things that has become apparently clear: 2050 is laudable, but we need to be faster.” — Trenton Allen
The next decade will be critical for a concerted transition from fossil fuels to be effective. By pursuing solutions internally and externally, the financial sector is poised to stimulate change as a service-providing industry as well as a key player and foundational piece of society. By stimulating systemic change within the industry, and including realistic risk metrics into portfolios, the path to a net zero future will become increasingly clear. The roles that banks hold in society are essential, and similarly will their impact be necessary to pursue a sustainable future. We need leaders in this field to be heard, their actions catalyzed, and a mobilization effort to be realized.
With trillions of dollars of assets currently flowing to the fossil fuel industry, US banks have the leverage and an opportunity to reverse that flow. Instead, by shifting to invest in climate solutions, the financial sector has the opportunity to step up to become leaders in addressing the risks of climate change. Matthew and Morgan Stanley’s Monday announcement to reach Net-Zero Financed Emissions by 2050 is a huge step in this direction. For the sake of our climate and our future, we need all banks to take this on. The time is now. And the need is great.
- Edie Farwell, Senior Program Director, Climate Solutions, Confluence Philanthropy
