The FT has reported this afternoon that:
The leaders of major banks and other financial companies have rejected suggestions that they are not doing enough to combat climate change and resisted calls that they should refuse to work with clients that are major polluters.
As they then note:
The comments came at the World Economic Forum in Davos on Tuesday, after climate campaigner Greta Thunberg hit out at companies that she said were not doing enough.
In other words, this is deliberate and policy. I presume that the FT thinks the following summarises the sentiment of bankers and banks:
Mike Corbat, chief executive of Citibank, said it was not the job of banks to ensure that companies were adopting environmentally friendly business models by unilaterally cutting off finance for polluting businesses. “I don't want to be the sharp end of the spear, meaning I don't want to have to be the one telling [companies] or enforcing standards in an industry or business,” he said. He added: “We don't want to find ourselves being the person that dictates winners and losers. A bank's job is to support the communities in which it operates. It is not to dictate outcomes.”
Let's leave aside for the moment that picking winners and losers is exactly what bankers do every day: that's what credit risk rating does.
And let's also leave aside that they must be doing their job really badly if they think that long term lending to companies with what must be failing business models is good business to pursue.
In other words let's dismiss the fact that, first of all, he's knowingly talking nonsense and, secondly, that he's also who a really poor banker, and let's instead think about what else this means.
It means that the banking sector has just chosen to become the focus of climate change activists in a way that consumers can really influence. Banking has always been subject to consumer pressure in a way that, to be candid, oil companies cannot be since ultimately right now most of us have no choice but buy oil when we do have a choice on our bankers and the chance to make the reasons for our decisions known.
Welcome to be next banking PR disaster. It's going to be happening near you.
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So what they can’t invest in or provide capital for would include;
The dye industry
The chemical industry
The product manufacturing industry
The mining, ore processing and extractive industries
The leather and tanning industries
The lead and all smelting industries
The lead battery and electronic recycling industries
The retail food industry
The above are seen as the most polluting in terms of effluent and waste but if you include Co2 emissions then you have a different hierarchy
The fossil fuel industry
The farming industry
The fashion industry
The transport industry
The construction industry
The technology industry
There is effectively nothing left to invest in or is every business looking for capital to be vetted on their envriomental performance, not a bad idea, but on what terms and by whose authority and on what criteria. That is not a banks job. That is the job of Government regulation and regulators.
Jim
If all these businesses are likely to be bad risks in a changing world (and they are) why are banks lending to them?
I suggest you get real
Richard
Not all of the operators within these industries are “bad risks” as without them we have no civilisation and certainly could not produce the means to produce “green energy” which is far from green.
Banks are not worried about secular trends which may contain up to 4, 5 year business cycles. They will make money within those cycles either on the upside or downside and as long as those industries remain viable they will continue to supply credit/capital. There is no sign that any of these industries are not going to remain viable in the next 20 – 30 years as there is nothing on the horizon which can replace them. That is the reality.
If I might say so Jim, you clearly share the small world view of the climate denier
I wonder when the sand might clear from your ears?
That’s a deeply disingenuous statement from Mike Corbat.
But it sums up the attitude we’ve come to expect of the big banking industry.
“A bank’s job is to support the communities in which it operates.”, he says. But banks are increasingly selective about which communities those are, and they don’t hesitate to remove their branches and cash machines from the communities they don’t wish to support any longer. I would suggest that makes it look very much as if they are in the business of picking low-hanging fruit and don’t give a toss for ‘communities’.
It makes Sustainable Cost Accounting look like an urgent necessity if the bigger functions of banking are not going to behave in the same way. The neoliberal monetarist agenda has put finance very firmly in the driving seat of a cart to which the political horse is tethered at the back. It’s a very fine cart, a coach even, but it’s going nowhere but downhill.
Here´s a straw in your wind – https://icebreakerone.org/2020/01/22/seri/
Thanks
Musing on that…..
A few more straws like this and soon we´ll have a haystack. https://www.reuters.com/article/us-usa-election-warren/warren-calls-on-big-u-s-banks-to-disclose-preparation-for-climate-risk-idUSKBN1ZL1VQ?utm_source=twitter&utm_medium=Social
A couple of other headlines from the FT recently. “Citi given record fine by BoE for ‘serious’ reporting failures”. “Citi closes foreign currency accounts for less wealthy clients”.
Triodos & the Ecology BS manage a successful ethical business.
https://reneweconomy.com.au/portugal-reaches-100-renewables-ends-fossil-fuel-subsidies-32820/
It can be done.
This (see link below) from the Bank for International Settlements and the Sydney Morning Herald is something of a must see. It not only relates to the post above but it has wide-ranging implications for climate policy, Green New Deal, MMT, QE, the next GFC and more besides.
https://www.smh.com.au/politics/federal/rba-told-to-mobilise-all-forces-to-save-the-economy-from-climate-change-20200120-p53szi.html
For those who may not quite follow the gist of the article what the BIS is suggesting is that the Australia’s central bank use monetary financing to buy carbon intensive industrial assets for the purpose of shutting them down. One implication of that would be an effective bailout for the financiers and shareholders involved. For the BIS to actually come out and say this is remarkable (for them) and arguably historic.
As an aside, its worth noting that this idea isn’t entirely unprecedented in Australia. In 2012, dot com tycoon Graeme Wood and his fellow green activist, Kathmandu founder Jan Cameron, bought Tasmania’s Triabunna woodchip mill for $10 million, and promptly shut it down, to end the logging of native forests in southern Tasmania.
Anyhow the BIS’ statement was intended for the whole world not just one country. They have apparently written a small book (113 page report) on the subject which can be found here:
https://www.bis.org/publ/othp31.htm
I will be blogging these soon
You again willfully misrepresent that which you do not agree with using pejoratives like “climate denier” to cast doubt on the efficacy of any opposing argument or observation.
I am not nor ever have been a climate denier firmly of the belief that climate change is a never ending process which at its worst has seen the Earth turned into a ball of ice on two occasions through tectonic plate shifts, basalt flows covering hundreds of thousands of square kilometres and massive volcanic action.
The current dogmatist’s pursuit of a hypothesis that anthropogenic Co2 is the main driver of climate change is theoretically implausible and flies in the face of the laws of basic physics. However, if anyone can supply a verifiable reproducible experiment that proves such a hypothesis works I will happily accept this as proof but try as I might I cannot find any.
I may be hard of hearing and my eyesight might not be what it once was but I can still recognise BS policy initiatives that do nothing for the environment being produced and put forward, putting large sums of money in the pockets of some very powerful people which rely on the unproven hypothesis of anthropogenic Co2 radiative warming. This will impinge on everyone making everyone’s world infinitely smaller.
I think it’s time you troubled someone else Jim
You’ve had enough of a platform here
Jim Craig says:
“I am not nor ever have been a climate denier firmly of the belief that climate change is a never ending process which at its worst has seen the Earth turned into a ball of ice on two occasions through tectonic plate shifts, basalt flows covering hundreds of thousands of square kilometres and massive volcanic action.”
That makes you a climate change denialist. If you think it doesn’t you are just not on the same page as anybody who takes the problem seriously.
The world will end when the Sun burns out. How useful is that despite its being true ?
Richard,
You are so wrong! Rating agencies do the credit rating of companies and the market prices the risk, not the banks.
So the bank still rates the credit
it just outsources who does it
I am so right
Who proves the risk?
Maybe you don’t know this, but in an uncertain world appraising risk is a matter of judgment and not obtaining proof
It does sound as though you have a lot to learn
Who prices the risk?
Amazingly, bankers can multi-task
It’s a staggering fact
And given what they’re paid, quite good news really
Please forgive me, but what are the inane questions for?
This article (see link below) details many of the reasons why bankers should be more circumspect about any dismissive statements that they make on the subject of the environment. But the article below isn’t an article, its an advertisement (a “paid post”) from Zurich Insurance published in the Financial Times and that gives it an extra level of meaning.
If the bankers don’t listen to these folk, drawn from their own ranks then they are just not listening at all and don’t deserve to hold the positions that they occupy.
https://biggerpicture.ft.com/global-risks/article/loss-biodiversity-puts-food-supplies-medical-care-risk/?utm_source=dianomi&utm_medium=paid
Heading to be a blog Marco
Thanks
[…] Fante has drawn my attention to a new report, published for Davis and promoted on the FT website by the Zurich Insurance […]
You’re wrong again.
The market prices the risk, not the banks
Given that we are discussing how bankers mange their decision making you’re now just being ridiculous
Please don’t call again