March 14, 2021

Kerry to Wall Street: Put your money behind your climate PR

“There’s an urgency in the timing,” said Rachel Kyte, who led sustainable development at the…

“There’s an urgency in the timing,” said Rachel Kyte, who led sustainable development at the World Bank and was its special envoy for climate change. “It’s a political hot potato that Kerry is dealing with.”

Kerry has pitched banks on creating a U.S. net-zero banking alliance following the climate commitments from six major Wall Street banks, according to two people familiar with the discussions. Citi, Wells Fargo, Bank of America, Morgan Stanley and Goldman Sachs all set 2050 net-zero goals and JPMorgan Chase has said its lending would be aligned with the Paris agreement although Kerry and his team are pushing for more specific financial commitments as part of this effort.

Kerry also wants clear near-term actions from banks by 2030, which would align with the Biden administration’s timeline for the new emissions target it intends to submit as part of the Paris Climate Agreement process.

A Wall Street banker would not discuss specifics of what Kerry has asked, but confirmed that “the big U.S. banks are obviously discussing with his team directly.”

“It’s trying to figure out collectively whether there’s more that can be said,” the person said. An official at another Wall Street bank said Kerry made similar asks of that financial institution.

Daniel Firger, managing director of Great Circle Capital Advisors, said so far what banks have publicly pledged on climate is “vague,” and Kerry is now leading a “disambiguation” effort.

“No one knows what they mean yet, including Kerry’s team. But this is where the rubber hits the road,” said Firger, who has called for more climate financing from Wall Street. “It’s going to get quite fraught very quickly.”

In meetings with the bankers, Kerry has made an appeal that the public sector alone cannot catalyze the trillions of dollars of investment needed to tame rising emissions, especially in developing nations making investment decisions in electricity and transportation infrastructure that will last decades.

The White House met with environmental and Wall Street watchdog groups on March 9 to discuss its approach to potential financial sector regulations and executive actions to limit risk from climate change-fueled shocks. Groups on the call included the Center for American Progress, Public Citizen, Rainforest Action Network, Sierra Club and, among others.

A person who participated in the virtual meeting with domestic climate chief Gina McCarthy, her deputy, Ali Zaidi, National Economic Council Director Brian Deese and his deputy, Bharat Ramamurti, said the administration is considering issuing an executive order on climate finance for the April 22 summit.

The Wall Street official, who was not in the meeting, said mandatory disclosure of material climate risks for publicly listed companies is “probably going to be the first mover,” given the body of work already done at the Securities and Exchange Commission for Obama-era voluntary guidelines. Environmental activists, however, have said such rules are merely a starting point.

“From what we’ve been hearing, the plan is to go beyond just disclosures,” said Collin Rees, a senior campaigner with Oil Change International, a group that attended the March 9 meeting.

Climate activists want Biden and Kerry to put more pressure on these Wall Street players. They contend banks’ commitments to green their lending practices are too vague and full of loopholes, and they worry financial institutions will opt for questionable solutions such as purchasing carbon offsets to allow them to continue to finance fossil fuel infrastructure.

“It seems like so far [the Biden administration is] excited about the voluntary commitments that banks have agreed to and they are talking about that,” Alexis Goldstein, senior policy analyst with Americans for Financial Reform, whose group participated in the March 9 call, said of the Biden administration. “Our hope is they will push them beyond what they have already preemptively said they would do. A reach goal.”

Kerry’s efforts to have included pressing his friends in top positions, including Bank of America’s CEO Brian Moynihan and Vice Chair Anne Finucane who oversees the bank’s sustainable investing arm. Kerry also chaired a global advisory council for Bank of America after leaving the Obama administration.

Bank of America declined to comment on the details of the discussions, but confirmed talks were taking place.

“We have helped Secretary Kerry get a sense of the extent that leading banks are committed to the transition to a low-carbon, sustainable future,” spokesperson Bill Halldin said.

Kerry has also brought in personnel to help with that task, hiring Mark Gallogly, an investor and Democratic donor, to head business outreach.